What is moving average convergence divergence (MACD) and how to spot MACD crossover?
Moving average convergence divergence(MACD) is a technical momentum indicator. The relationship between two exponential moving averages (EMAs) of the price of a security is displayed by the trend-following momentum indicator known as MACD. The 26-period EMA is subtracted from the 12-period EMA to calculate the MACD line.
The MACD line is the output of the calculation. The signal line is a nine-day EMA of the MACD line and can be used as a trigger for buy or sell signals, When the MACD line crosses above the signal line, traders may buy the asset; when it crosses below, they may sell—or short—the security. There are several ways to interpret MACD indicators, but the most popular ones are crosses, divergences, and swift rises and falls.
MACD KEY POINTS:
- The 26-period exponential moving average (EMA) is subtracted from the 12-period EMA to create the MACD line. A nine-period EMA of the MACD line serves as the signal line.
- MACD works best with daily periods, which typically have a length of 26/12/9 days.
- When the MACD line crosses over the signal line is a bullish signal and when drops below it, is a bearish signal.
- MACD Alerts traders to the strength of a directional advance and signals the possibility of a price reversal. MACD can assist in determining whether an asset is overbought or oversold.
MACD Crossover Bullish/Bearish Signal
When the Blue line or MACD(Fast) Line crosses above the Signal(Slow) line from below, it's a bullish signal . Conversely, when the blue line(MACD) crosses below the red line(MACD Signal) from above is a bearish signal.
Please Note:
Because MACD crossover works better in daily time frames. So our input data for analyzing MACD is Daily Candle Sticks. we do analyze MACD only for limited top cryptocurrencies . (based on their market cap)
The moving average convergence divergence provides many false signals. Any trading decision should not rely solely on MACD crossover. It is best practice to use the MACD crossover signal along with other indicators and trading decision metrics.
Even while it is simple to locate a system that has been successful in the past, there is no assurance that it will continue to do so.
If you want to learn more about MACD, please watch the below video.