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Moving Average Convergence Divergence - the workhorse of trend-following momentum
MACD (Moving Average Convergence Divergence) is a trend-following momentum indicator that shows the relationship between two exponential moving averages. Created by Gerald Appel in the 1970s, it remains one of the most widely used indicators in technical analysis.
The name describes exactly what it does: it tracks whether moving averages are converging (coming together) or diverging (moving apart). When the faster EMA pulls away from the slower EMA, momentum is increasing. When they come together, momentum is fading.
Key insight: MACD is a lagging indicator - it tells you what has happened, not what will happen. It excels in trending markets but produces many false signals in ranging, choppy conditions. Use it to confirm trends, not predict them.
Trading Signals ▲ Bullish Crossover BUY MACD crosses above Signal line. Indicates momentum shifting bullish. Stronger when occurring below the zero line (oversold territory).
SELL MACD crosses below Signal line. Indicates momentum shifting bearish. Stronger when occurring above the zero line (overbought territory).
ZERO MACD crosses above zero. Confirms uptrend - 12 EMA is now above 26 EMA. Less timely but more reliable than signal line crosses.
ZERO MACD crosses below zero. Confirms downtrend - 12 EMA is now below 26 EMA. Use to confirm bearish bias, not as entry signal.
MACD Divergence Trader Tier Bullish Divergence Price makes lower low, MACD makes higher low. Signals weakening selling pressure...
Price makes higher high, MACD makes lower high. Signals weakening buying pressure...
MACD divergence identification, confirmation rules, and when divergence fails.
Settings Guide The default MACD settings (12, 26, 9) work well for most situations, but you can adjust them based on your trading style and timeframe.
MACD histogram is your early warning system. When the histogram starts shrinking while price still trends, momentum is fading. Don't wait for the crossover — the histogram shift gives you a head start.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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