MACD

A Brief Overview of MACD

The use of the MACD indicator is very simple; just remember one phrase: the relationship between a baseline and two lines. Here, the baseline refers to the zero line, and the two lines are respectively the DIF and DEA lines, also known as the fast line and the slow line. Next, let's discuss the four ways the fast line and slow line intersect around the zero line.

1. Above the Zero Line: When the fast line crosses above the slow line, it is called a golden cross. The price of the currency moves upward with the market trend; at this point, the overall market forms a bullish pattern, indicating a buy signal. When the fast line crosses below the slow line, the market is primarily in a consolidation phase. If recent momentum looks good, one can hold positions and ignore short-term fluctuations. If the fluctuations are too large, one should reduce positions and observe.

2. Below the Zero Line: When the fast line crosses below the slow line, it is called a death cross. At this point, the market is in a bearish downtrend, and it is advisable to sell and watch from the sidelines. The overall market shows rapid downward price fluctuations in the short term. When the fast line crosses above the slow line, it is primarily a recovery upward; although there is a pullback, it resembles a flicker of light before darkness, indicating a weakening bullish trend and a strong bearish trend. If one gets trapped before this, it is advisable to exit during a market reversal to minimize unnecessary losses.

3. MACD Indicator Mnemonics
1. When the fast line in the MACD indicator crosses above the slow line from below, it forms a golden cross, which is a buy signal. The higher the position of the golden cross, the stronger the buy signal. A golden cross above the zero line is strong, while below it is weak.

2. When the slow line in the MACD indicator crosses below the fast line from above, it forms a death cross, which is a sell signal. The lower the position of the death cross, the stronger the sell signal. A death cross above the zero line is weak, while below it is a death cross.

In practical operations, the MACD not only helps beginners capture strong upward points but also offers bottom-fishing characteristics; it provides both buy and sell points, reflecting the golden cross and death cross. This is a necessary path for skilled technical analysis, and understanding it greatly increases the chances of success for newcomers.