The MACD indicator stands for Moving Average Convergence Divergence. It is calculated by taking the 26-day exponential moving average and subtracting the 12-day exponential moving average. A 9-day exponential moving average is then plotted on top of the MACD and can trigger a buy or sell signal.
A MACD indicator can be used to signal when a trend has been formed, which happens when the faster and the slower moving averages cross.
Be careful of the lag that can be associated with the MACD, though it’s based on historical moving averages.
Overall, as with most indicators, you probably don’t need them when you can read momentum information directly from your chart. But indicators can be great tools for building confluence and also to create more objectivity in your trading.
Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. … Traders may buy the security when the MACD crosses above its signal line and sell—or short—the security when the MACD crosses below the signal line
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