Understanding the MACD Indicator in One Article! A Must-Read for Beginners 🌟
📌 MACD Indicator Composition
DIF Fast Line: The difference between the 12-day exponential moving average and the 26-day exponential moving average.
DEA Slow Line: The 9-day moving average of DIF.
MACD Red-Green Histogram: Reflects the changes in the strength of both bulls and bears; red bars turning green indicate a bearish advantage; green bars turning red indicate a bullish advantage.
0 Axis: The dividing line of bullish and bearish strength; above the 0 axis is dominated by bulls, below the 0 axis is dominated by bears.
🌟 10 Key Phrases to Remember for MACD!
1️⃣ Zero Axis Determines Bullish or Bearish
Both lines above the 0 axis → Bull Market 📈 (Hold stocks for a rise)
Both lines below the 0 axis → Bear Market 📉 (Run for your life)
The 0 axis is the boundary between bulls and bears, easily identifiable!
2️⃣ Golden Cross Below Water is Just a Rebound, Don't Participate Below 0 Axis
Golden cross below the axis = rebound during a downtrend, mostly a trap!
Wait until both lines stabilize above the 0 axis before taking action, to avoid bottom fishing turning into catching the falling knife.
3️⃣ Buy Small, Sell Small, Firmly Grasp Bullish and Bearish Turning Points
Buy Small: Stock price drops, the wave after the green bar is shorter than the previous wave → Bearish power is exhausted, bottom fishing signal.
Sell Small: Stock price rises, the wave after the red bar is shorter than the previous wave → Bullish fatigue, top escaping signal.
Phrase: “Big before, small after, handle the golden cross; high before, low after, run when volume grows.”
4️⃣ Divergence Catches Reversal, Precisely Escape Tops and Catch Bottoms
Top Divergence: Stock price hits a new high 🔥, but MACD is declining → Rush to escape the top!
Bottom Divergence: Stock price hits a new low 💧, but MACD is rising → Prepare to bottom fish!
Top divergence accuracy > bottom divergence, especially reliable at weekly levels.
5️⃣ If It’s About to Die, It Will Surge; If It’s Not About Gold, It Will Plummet
Red bar shortens and then suddenly lengthens (about to die) → Main force's cleanup ends, main rise starts 🚀
Green bar shortens and then suddenly lengthens (not about gold) → Downward continuation, quickly cut losses.
6️⃣ High Position Shortens, Quickly Take Profits
Stock price surges + red bar suddenly shortens + far from 0 axis → Main force offloading, don’t hesitate to take profits!
7️⃣ Low Position Golden Cross, Surge Blossoms
Stock price plummets + golden cross far from 0 axis → Must rebound; if a second golden cross appears, strength doubles 💥
8️⃣ Fire Burns Continuous Camps, Long Bull Arrives
Red bar continues for >2 months → Sign of a big bull stock 🐮, hold steady and don’t get off the train!
9️⃣ Golden Cross Above Water Rides Rockets, Dead Cross Below Water Jumps Off a Cliff
Golden cross above the 0 axis → Main rise starts 🚀
Dead cross below the 0 axis → Warning of a plummet ⚠️
🔟 Neither Here Nor There, A Rebound is Certain
After breaking below the 0 axis, the 3rd or 4th wave → Must rebound! Combine with wave theory for short-term trades.
