Trading & Technical Analysis

What is the MACD indicator and how do you read it?

The MACD (Moving Average Convergence Divergence) is a momentum indicator that tracks the relationship between two moving averages of price to show shifts in trend strength and direction. It plots a MACD line, a signal line, and a histogram of the gap between them; traders watch for the lines crossing as a momentum signal. For example, the MACD line crossing above the signal line is often read as strengthening upward momentum. These crossovers describe what has happened to price momentum, not what will happen next, so MACD works as one input rather than a standalone trading rule.

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