MACD : Definition & How To Use It
The Moving Average Convergence Divergence (MACD) is a popular technical analysis indicator used to identify momentum in financial markets. Here's how to use the MACD indicator: Set up the MACD indicator: The MACD consists of three components: the MACD line, the signal line, and the histogram. The MACD line is the difference between two exponential moving averages (EMA) of different time periods, typically 12 and 26. The signal line is a moving average of the MACD line, usually a 9-day EMA. The histogram represents the difference between the MACD line and the signal line. Look for crossovers: When the MACD line crosses above the signal line, it indicates a bullish signal, while a cross below the signal line is bearish. These crossovers can help traders identify potential buy or sell opportunities. Watch for divergences: If the price of an asset is making new highs, but the MACD line is not following suit, it could indicate a bearish divergence. Conversely, if the price