💡Indicator Spotlight - MACD💡
Moving Average Convergence/Divergence (MACD) is a momentum based indicator that shows the relationship between 2 exponential moving averages (EMAs) of an asset
The common methods for using MACD are crossovers, divergences & directional strength 🧵
Moving Average Convergence/Divergence (MACD) is a momentum based indicator that shows the relationship between 2 exponential moving averages (EMAs) of an asset
The common methods for using MACD are crossovers, divergences & directional strength 🧵
On the MACD indicator, you’ll see two lines: The MACD Line and The Signal Line
The MACD line is created by subtracting the 26-period EMA from the 12-period EMA.
The Signal line is a 9-period EMA of the MACD line.
These lines oscillate in tandem with price action of the asset.
The MACD line is created by subtracting the 26-period EMA from the 12-period EMA.
The Signal line is a 9-period EMA of the MACD line.
These lines oscillate in tandem with price action of the asset.
MACD is also displayed with a histogram that graphs the distance between MACD & its signal line.
Green bars on the histogram above the ‘Zero line’ indicate positive momentum📈
Red bars below the ‘Zero line’ indicate negative momentum📉
So how do all these pieces work together?
Green bars on the histogram above the ‘Zero line’ indicate positive momentum📈
Red bars below the ‘Zero line’ indicate negative momentum📉
So how do all these pieces work together?
When price is increasing, the MACD line is generally going to be positioned above the Signal line and the histogram will be green.
The faster price increases, the farther the MACD line will get from the Signal line, and therefore, the longer the green histogram bars will become.
The faster price increases, the farther the MACD line will get from the Signal line, and therefore, the longer the green histogram bars will become.
When price is decreasing, the Signal line is generally going to be positioned above the MACD line and the histogram will be red.
The faster price decreases, the farther the Signal line will get from the MACD line and, therefore, the longer the red histogram bars will become.
The faster price decreases, the farther the Signal line will get from the MACD line and, therefore, the longer the red histogram bars will become.
One common way traders use MACD is the crossover strategy.
Bullish Cross = MACD line crosses up on the Signal line. 🐂
Bearish Cross = MACD line crosses down on the Signal line. 🐻
The histogram can be used as a reference point for assessing the validity of the cross.
Bullish Cross = MACD line crosses up on the Signal line. 🐂
Bearish Cross = MACD line crosses down on the Signal line. 🐻
The histogram can be used as a reference point for assessing the validity of the cross.
Another way to trade using MACD is to look for divergence.
When the momentum of the indicator contradicts the movement in price, it can lead to a reversal in trend.
🐂 = Price makes a lower low + MACD makes a higher low
🐻 = Price makes a higher high + MACD makes a lower high
When the momentum of the indicator contradicts the movement in price, it can lead to a reversal in trend.
🐂 = Price makes a lower low + MACD makes a higher low
🐻 = Price makes a higher high + MACD makes a lower high
Looking for more info on all things MACD?
Watch @Jake__Wujastyk walk through how to use the indicator to improve your trading, some setup configurations, and some tricks you can use in your day-to-day analysis!
📺trendspider.cc
Watch @Jake__Wujastyk walk through how to use the indicator to improve your trading, some setup configurations, and some tricks you can use in your day-to-day analysis!
📺trendspider.cc
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