MACD

MACD consist of three items:

1 MACD = 12days price exponential moving average -26days price exponential moving average

2 Signal Line = 9days exponential moving average of MACD

3 MACD Histogram = MACD - Signal Line

The theory behind MACD is very complicated. Why is the calculation like that? I don’t have the answer for this. But I do know several uses of MACD

1 Golden cross/dead cross

There are 2 line in MACD: MACD line and signal line. When MACD line cross signal line from below to above, it means a golden cross, it is a signal to buy in. On the other hand, when MACD line cross signal line from above to below, it means a deadly cross, it is a signal to sell out. For details ,can refer to SMA.

2 Above 0 / below 0

There is a center line which indicate MACD = 0. When MACD is above 0 which is positive in value, it means 12EMA is above 26EMA, it means an uptrend sign after golden cross. When MACD  is below 0 which is negative in value, it means 12EMA is below 26EMA, it means an downtrend sign after deadly cross.

3 MACD Histogram

MACD Histogram is the difference between MACD-Signal Line. When histogram above 0, it means MACD is above Signal line and is and uptrend signal. However, when the histogram is too large in value, it means a retracement is coming.  It is same as the opposite.

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