Moving Average Convergence (MACD) (MACD) is one of the most popular indicators and used by many traders in technical analysis mainly to determine the momentum of price action on charts. It was created by Gerald Appel in the late 1970s. It can be said that MACD was created to visually see changes in strength, trend, momentum, and trend phase, and volatility in action. price action on the chart.

The MACD is formed by two moving averages that act as a failure of trend indicators and create a momentum oscillator by subtracting the long-term moving average from the short-term moving average. This formula produces the MACD as a dual indicator for both trend identification and momentum magnitude. The MACD lines fluctuate above and below the zero lines on the chart, while the moving averages combine, cross and split.

How to use MACD

Signal line crossover or centerline crossover and divergence serve as potential trading signals. The MACD is not used to identify overbought or oversold conditions, it is an indicator of trend and momentum that tells traders the direction of the current movement.

MACD crossovers and signal lines are often used as signals to trigger trading in the direction of the trend. A signal to buy when the signal line crosses above the MACD line and then takes profit when the signal line crosses below the MACD line. Similar to a sell signal. The MACD indicator can be used in many ways, but crossover and divergence signals are the most used.

The signal line crossover and the MACD line give a bullish signal, which is seen as a sign that the momentum is increasing strongly and the possibility that the price will form a higher high helps the uptrend to continue. This bullish crossover can occur near a bottom zone after a bull run or when the price breaks above the sideways zone.

Similar to bearish signals. The signal line intersecting below the MACD line is a signal that the price is losing momentum. This signal also signals the beginning of the downtrend and the end of the uptrend. MACD works best when used with other technical indicators for confirmation. For example, if you use MACD cross signals to enter a trade, then you can use the RSI indicator to exit when there is an overbought (RSI above 70) or over (RSI below level) signal. 30).

Also, if you have a significant crossover above the moving average, the MACD crossover can now increase the confirmation and odds for that trading strategy, giving it a boost. the chance of success is higher.