MACD (Moving Average Convergence Divergence)

MACD is one of the great technical indicators that traders use to measure the geographical direction of trends, momentum, and sometimes trend reversals that happen in financial markets. The MACD was developed by Gerald Appel and is derived from the relationship between two moving averages of the price of an asset.

The MACD has three main components: the MACD line, the signal line, and the histogram. The MACD line is the difference between the EMA of the price for a longer period, typically the 26 period EMA, and the EMA for a shorter period, which is typically the 12 period EMA. To create buy or sell signals Generate by plotting a 9-period EMA of the MACD - this is usually the signal line. The histogram displays the difference between the MACD line and the signal line to visualize a strength of momentum.

It occurs when the MACD line crosses above the signal line, a bullish signal that is a potential indication of upward momentum. The downward momentum is shown by the cross of the MACD line below the signal line, a bearish signal. Besides, traders look for divergences between the MACD and price action to anticipate trend reversals.

It is very popular due to its versatility and simplicity, whether using MACD to identify market trends or really fine-tuning entries and exits.

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~ Nesaty