MACD
The MACD indicator is short for:
📊 Moving Average Convergence Divergence
This means: convergence and divergence of moving averages, and it is a popular technical analysis tool used to understand market direction and momentum and to accurately identify entry and exit points.
🔍 How MACD works
* MACD depends on the difference between:
- the 12-period moving average (EMA12)
- the 26-period moving average (EMA26) and a third line is drawn called
- the Signal Line = the 9-period moving average of the MACD line.
📈 What we look for in MACD
1. Crossovers:
✅ MACD crossing above the Signal Line = Buy signal (upcoming bullish trend).
❌ MACD crossing below the Signal Line = Sell signal (potential bearish trend).
2. The distance between the two lines (momentum):
* The greater the distance = stronger momentum.
* The smaller the distance = weaker momentum.
3. Divergence:
If the price is rising, but the MACD is falling = ⚠️ Warning of a potential downward reversal.
If the price is falling, and the MACD is rising = 📈 Potential upcoming bullish signal.
🎯 When to use MACD
📌 To confirm bullish or bearish trends.
🔍 To improve timing for entering and exiting the market.
🔄 With other indicators like RSI for more precise analysis.
