Moving average convergence divergence (MACD) is a
trend-following momentum indicator that shows the relationship between two
moving averages of prices. The MACD is calculated by subtracting the 26-day
exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the
MACD, called the "signal line", is then plotted on top of the MACD,
functioning as a trigger for buy and sell signals.
Crossovers - As shown in the chart above, when the MACD
falls below the signal line, it is a bearish signal, which indicates that it
may be time to sell. Conversely, when the MACD rises above the signal line, the
indicator gives a bullish signal, which suggests that the price of the asset is
likely to experience upward momentum.
There are many traders wait for a confirmed cross above the
signal line before entering into a position to avoid getting "faked
out" or entering into a position too early, as shown by the first arrow. Now
MACD Indicator Search Engine is an integral part through which you can collect
information about Moving average convergence divergence.
Divergence - When the security price diverges from the MACD.
It signals the end of the current trend.
Dramatic rise - When the MACD rises dramatically - that is,
the shorter moving average pulls away from the longer-term moving average - it
is a signal that the security is overbought and will soon return to normal
levels.
Moreover, traders also watch for a move above or below the
zero line because this signals the position of the short-term average relative
to the long-term average. When the MACD is above zero, the short-term average
is above the long-term average, which signals upward momentum. The opposite is
true when the MACD is below zero. As you can see from the chart above, the zero
line often acts as an area of support and resistance for the indicator.


