How is MACD helpful?

<p>Traders can use the MACD for signal line crossovers when the nine-day EMA is crossed by the two-moving-averages line. Additional signals are generated when the two-moving-averages line crosses above or below the zero centerline on the oscillator. You can spot divergences between the MACD lines and the price action on the chart, highlighting weak trends and possible reversals.</p>

<p>The trend-following and momentum-forecasting abilities of the MACD are not bogged down by extreme complexity. This makes it accessible to both novice and experienced traders and allows for easier interpretation and confirmation. For this reason, many consider it among the most efficient and reliable technical tools.</p>

<p>Moving Average Convergence Divergence (MACD) measures the relationship between two moving averages of a security's price. When bullish or bearish momentum is high, traders use the MACD to identify entry and exit points. A MACD oscillator is used by technical traders in a variety of markets, such as stocks, bonds, commodities, and foreign exchange.</p>

<p id="isPasted">MACD uses three components: two moving averages and a histogram. Indicator lines may appear to be simple moving averages (SMAs), but they are actually layered exponential moving averages (EMAs). The MACD line is the main, slower line, while the signal line is the faster line.</p><p>When two moving averages converge, they are thought of as 'converging', and when they diverge, they are thought of as 'diverging'. Histograms show the difference between the two lines. When the MACD trades above the zero line, an uptrend is confirmed, below this line, a downtrend is confirmed.&nbsp;</p><p>If the market price is trending upward, reaching higher highs and lower lows, and breaking key resistance levels, traders may enter long positions. If the asset is in a downtrend, characterized by lower highs and lower lows, or if support levels are broken, traders may opt to enter a short position.&nbsp;</p>

<p>Three components make up the MACD indicator: two moving averages and a histogram. A MACD trading strategy can be classified into three types: Crossovers, Histogram Reversals, and Zero Crosses. Traders must be able to find the change because that is where the money is made. The question arises now as to how to trade using MACD. As there are two moving averages with different "speeds", the faster one will obviously react faster to price movement than the slower one. When a new trend begins, the faster line (MACD Line) reacts first and eventually crosses the slower line (Signal Line). As the fast line starts to "diverge" or move away from the slower line, it often indicates the beginning of a new trend. Here's how you can use the MACD indicator to trade.&nbsp;</p>