Full explanation of the practical usage of MACD indicators

The full name of MACD is Moving Average Convergence/Divergence, and it is a volatility indicator of moving averages. Unlike ordinary moving averages, it calculates the cumulative difference between the long-term and medium-term smooth moving averages (EMA). In MACD graphs, two graphs are usually displayed: one is a solid line, the MACD line, and the other is a dotted line, the MACD moving average. The gap between these two lines can be represented by a column-shaped vertical line chart (Oscillators), centered on the zero (0) axis. Through the positive and negative changes of the bar chart, we can determine which of the MACD line and the Trigger line is up and which is down, which can be used as an important reference for judging the timing of buying and selling. According toTickmillPlatform veteran traders share that correctly understanding these signals can effectively improve analytical efficiency.

MACD's buy signal

When the MACD line breaks through the 0 axis, it reflects the market trend upward, and the short-term moving average rises above the long-term moving average, which is a more common buying signal.

If the MACD line breaks through the Trigger line, it indicates that the difference between the two moving averages is narrowing, and the short-term moving average shows signs of bottoming out and rebounding, and the market bottom may also appear, which can be used as a reference signal for buying.

When the MACD diverges from the market price trend, that is, the market price is lower than one wave, while the MACD is higher than one wave, it is usually regarded as an early sign that the market may be low, and has certain analytical value.

MACD's sell signal

When the MACD line falls below the 0 axis, it reflects the market trend downward, and the short-term moving average breaks below the long-term moving average, which is a common sell signal.

If the MACD line falls below the Trigger line, it also indicates that the difference between the two moving averages is narrowing, and the short-term moving average may turn back, and the market top may appear, which can be used as a reference signal to sell.

When the MACD deviates from the market price, that is, the market price is higher than one wave, while the MACD is lower than one wave, it is usually regarded as an early sign that the market may peak, and has certain reference value.

Other forecasting principles

When both the MACD and the Trigger line are positive, that is, above the 0 axis, it indicates that the general trend is still in the bull market, and the trend direction is upward. At this time, the Oscillators extend upward from the 0 axis, and a relatively positive layout can be considered.

When both the MACD and the Trigger line are negative, that is, below the 0 axis, it indicates that the general trend is still in the bear market and the trend direction is downward. At this time, the Oscillators fall below the center 0 axis from above the 0 axis and continue below the 0 axis. At this time, the corresponding exit strategy can be considered.

When the MACD diverges from the trend of the K-line chart, it should be regarded as a signal that the price is about to reverse, and it is necessary to pay close attention to the changes in the disk.

In terms of advantages, MACD can automatically define the current price trend's excessive or bearish state, helping to avoid the risk of reverse operation. After the trend is confirmed, it can be used to develop entry and exit strategies to reduce unnecessary operations and avoid the consequences of improper timing. MACD is suitable for judging medium-term movements, but it is not suitable for ultra-short-term trading. In addition, MACD can be used to judge the beginning and end of a medium-term rising or falling market, but it is limited for box volatility or sideways sticking. Similarly, MACD is better for analyzing the movement of active varieties, but it is not suitable for varieties with low price volatility. Overall, the core function of MACD is to identify overbought and oversold points in the market, and then identify possible turning signals.

(1) Trading strategies of short-term investors

In the MACD chart, if MACD1 turns from top to bottom, or MACD2 turns from top to bottom, it indicates that the price may be facing downward pressure, and appropriate position reduction or exit can be considered.

2. On the contrary, if MACD1 turns from bottom to top, or MACD2 turns from bottom to top, it indicates that the price may usher in an upward opportunity, and appropriate intervention can be considered.

3. The frequency of such buying and selling signals is relatively high, and the number of operations by investors will also increase accordingly. In a sharply rising market, prices may adjust, and investors may not be able to obtain very generous returns, but relatively speaking, the risk they need to bear is also low.

(2) Trading strategies of short and medium-term investors

In the MACD chart, a vertical line is called a MACD bar, and the zero axis is the watershed of the bar. A bar that appears below the zero axis is called "negative"; if it appears above the zero axis, it is called "positive".

2. For short and medium-term investors, when the MACD bar changes from negative to positive, that is, when the bar rises from below the zero axis to above the zero axis, it is a reference buy signal. If you use the MACD indicator to analyze, you will see that MACD1 crosses MACD2 from bottom to top.

3. Conversely, when the bar changes from positive to negative, that is, when the bar falls from above the zero axis to below the zero axis, it is a reference sell signal. Similarly, MACD1 will cross MACD2 from top to bottom.

(3) The trading strategies of mid-tier investors

1. In the MACD chart, the zero line is an important reference line. If both MACD1 and MACD2 are above the zero line, the uptrend has not ended. Therefore, even if MACD1 and MACD2 turn down above the zero line, or MACD1 falls below MACD2, it is usually just a position squaring signal for a long position. Only when MACD1 is below the zero line and falls below MACD2, it constitutes a more reliable sell signal.

2. Conversely, if both MACD1 and MACD2 are below the zero line, the downtrend has not ended. Therefore, even if MACD1 and MACD2 turn up below the zero line, or MACD1 rises above MACD2, it is usually just a position squaring signal for a short position. Only when MACD1 is above the zero line and rises above MACD2 can it be regarded as a more reliable buying reference.