The picture above is:

MACD: EMA 12 and EMA 26

Signal Line: Exponential moving average (EMA) 9 of the MACD.

MACD histogram: Includes MACD line - Signal line

Explanation of MACD Indicator (Moving Average Convergence Divergence)

In short, use MACD as a technical indicator to determine whether an asset is overbought or oversold.

Traders use MACD to try to analyze buy and sell signals by interpreting the movement of this indicator. Also, use MACD to determine the strength of a trend.

MACD is called the convergence and divergence line of the two exponential moving averages (EMA). 

MACD tries to capture short-term price movements relative to long-term average prices.

MACD is called the convergence and divergence line of the two exponential moving averages (EMA). 

MACD tries to capture short-term price movements relative to long-term average prices.

Convergence occurs when moving averages are moving toward each other.

Divergence occurs when moving averages are moving away from each other.

The fast 12-day moving average (EMA) is established and is responsible for most MACD changes, and the slower 26-day average (EMA) is less sensitive to price changes.

These two lines 12 and 26 will subtract each other and we get MACD 9.

The MACD line is drawn around a horizontal line and fluctuates above and below it. The rule that line to be zero - on that line it is positive and below that line it is negative. When the MACD line is above the zero lines, it means there is no difference in the values ​​of both EMAs.

The zero lines are crucial as they can show areas of support and resistance.

MACD POSITIVE & MACD SOUND


Positive MACD shows that the 12-day EMA is above the 26-day EMA.

As the price momentum accelerates, the faster EMA will move out of the slower EMA thereby increasing the value of the MACD line.

Opposite,

Negative MACD shows that the 12-day EMA is below the 26-day EMA.

And as the price momentum decelerates, the faster EMA will move out of the slower EMA, reducing the value of the MACD.

Another line displayed on the indicator is the signal line, the signal line that shows the 9-day EMA of the MACD.

The buy and sell signals generated by these two lines interact with each other. These two lines fluctuate around the zero lines (the zero on the right of the chart) on the right side of the chart.

Strategy with MACD Indicator
  • The MACD indicator generates three basic types of signals;
  • Signal Line Crossovers (Cut Signal Line)
  • Signal Zero Line Crossovers (Zero Line Crossing)
  • Signal Divergence (Divergence)
Signal cut line Signal
  • When the MACD line crosses below the Signal Line, it is considered a bearish signal, indicating that it might be time to sell.
  • When the MACD line crosses above the Signal Line, it is seen as a bullish signal, which suggests that it is possible this is the time when the price will move higher.
  • Most traders wait for the MACD line to cross the Signal Line before entering to avoid getting a wrong breakout or entering too early.
Zero Line-cut signal


Zero Line Cross signal occurs when the MACD line crosses the Zero Line in either up or down direction.
  • The trend will increase when the MACD line crosses the zero line in the upwards direction and goes from negative to positive, which shows that the bullish momentum will occur. 
  • The trend will decrease when the MACD line crosses the zero line in the downward direction and goes from positive to negative, which shows that the downside momentum will occur.
Divergence signals


Divergence occurs when the movements of the MACD and the price action differ.
  • A bullish divergence occurs when the price falls to create a lower low, but the MACD stops at a higher low.
  • A bearish divergence occurs when the price moves up to create a higher high, but the MACD stops at a lower high.
MACD divergence could alert watch to watch a price reversal occurs.

MACD CHART


The MACD chart is a bar chart. It measures the difference in height between the MACD line and the signal line. When the chart is at zero, it shows us that the signal line and macd are equal, an up / down diagonal will occur.

TIP TO USE MACD

If you want more sensitive MACD then you should try setting 5.35.5 which might be more suitable for long time frame charts.

Remember that each indicator is not always accurate.