How to use MACD in trading ?
What is MACD?
Moving Average Convergence Divergence, is a medium- and long-term trend index， widely used by investors.
MACD is a combination of two lines: the slower moving average DEA and the faster moving average DIF.
The distance between this two line is displayed by the red bar and green bar. The junction of those two bars is called 0 axis.
How to use MACD in trading？ When DEA and DIF run on the top of the 0-axis, rising force is dominant. At this time, DEA DIF cross over the 0-axis is the signal of taking long positions.
When DEA and DIF run under the 0 axis, downward force is dominant. At this time, DEA DIF cross under the 0-axis is the signal of taking short positions.
DEA DIF run close to the 0-axis for a long time. Once it diverges upward, the rising trend is very strong. We should make long positions and hold them.
MACD deviates from the price and appears at the end of a trend, representing a reversal. When price rises, MACD falls, indicating that the rising trend is to reverse, which is the signal of long positions coming out.
When the price falls, MACD rises, indicating that the downward trend is to reverse, which is the signal of short positions coming out.