Moving Average Convergence Divergence is a technical indicator investors use to identify moving averages that show a new trend. It is an easy-to-use indicator that measures the relationship of the Exponential Moving Average (EMA). Traders use the positioning of the MACD line and zero line to understand a trend.
In This Article
What is MACD?
How To Analyse Chart Using MACD
How To Use MACD on KEEV
Category
Momentum/Trend
Type
Lagging
MACD is a trend following momentum indicator depicting the relationship between two moving averages of a financial security’s price. A trend indicated by this momentum oscillator could be either bullish or bearish. Values of MACD oscillate around a line called the central or zero line.
This indicator is one of the trouble-free tools traders use to bring profit from a fellow trader. It is calculated by subtracting the 26th period EMA from the 12th period one.
You can analyse a chart depicting MACD via the MACD line and Zero line as reference points. While the MACD line is the faster one, the zero line is the slower one.
Check out the chart above for context.
If the MACD line reacts first and crosses over the zero line, it indicates a new trend has occurred. When the faster line (MACD) crosses below the zero line, it signals a downtrend. Conversely, when the MACD line crosses above the zero line, it signals an uptrend.
In addition, the MACD also signals to buy or sell trends. These are given when two MACD lines cross each other. When the MACD line crosses below the signal line, it is a sign to buy. On the other hand, an indication to sell is when the MACD line crosses above the signal line.