MACD
The MACD indicator consists of three key parts: MACD line, signal line and histogram.
By analyzing the intersection and differentiation of the two indicator lines of the
MACD indicator, it helps us to intuitively understand the price trend and intensity
changes.
How to calculate MACD indicator?
The MACD indicator includes three parts: DIF, DEA and MACD histogram. The
calculation formula is as follows:
MACD line (DIF, fast line) = 12-day moving average (EMA) - 26-day moving average
(EMA)
Signal line (DEA, slow line) = 9-day moving average (EMA) of the MACD line
Histogram (MACD histogram) = MACD line - signal line
The MACD indicator is generally used in two ways, namely crossover strategy and
divergence strategy.
Cross strategies are divided into golden cross and death cross, referred to as golden
cross and death cross.
Golden Cross (Golden Cross) means that the MACD line crosses the signal line
upwards (the fast line crosses the slow line upwards). At this time, the histogram
turns from negative to positive, and the color changes from red to green, indicating
that the market has turned from weak to strong, and may follow There is a wave of
upward movement, which is a potential buy signal.
Death cross (death cross) means that the signal line crosses the MACD line upward
(the slow line crosses the fast line upward). At this time, the histogram turns from
positive to negative, and the color changes from green to red, indicating that the
market has turned from strong to weak, and the next step may be There will be a
wave of decline, which is a potential sell signal.
Please note that when identifying golden crosses and death crosses, the simplest and
fastest way is not to look at the fast and slow line trends, but to look at the size and
color changes of the histogram. When the histogram gradually shrinks and changes
from red to green, it is a golden cross; conversely, when the histogram gradually
shrinks and changes from green to red, it is a death cross.
Divergence strategies are divided into bottom divergence and top divergence, also
called long divergence and short divergence.
✅MACD bottom divergence
Bottom divergence means that the price has fallen below the previous low, but the
MACD line (fast line) is higher than the previous low, that is, showing an upward
momentum. This indicates that the price may turn from falling to rising, which is a
potential buying signal.
✅MACD top divergence
Top divergence means that the price has risen above the previous high, but the
MACD line (fast line) is lower than the previous high, that is, showing a downward
trend, which indicates that the price may turn from rising to falling, which is a
potential sell signal.
Yesterday we learned the (RSI) indicator, and today we learned the MACD. We can
use the two together. That is to say, when (RSI) enters the overbought area and
MACD shows a top divergence, you must sell your stocks. , at the same time, when
(RSI) enters the oversold zone and MACD bottoms out, you must buy in time. The
combination of the two greatly enhances our success rate in buying and selling
stocks!
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