Better MACDWhat is the MACD?
The MACD (Moving Average Convergence Divergence) is a momentum and trend-following indicator. It’s based on the difference between two EMAs (Exponential Moving Averages) and helps spot:
Trend direction
Momentum shifts
Reversals
Entry/exit points
✅ Basic MACD Techniques
1. Signal Line Crossovers
Bullish Crossover: MACD line crosses above Signal → buy signal
Bearish Crossover: MACD line crosses below Signal → sell signal
🔸 Works best in trending environments, 200 SMA as a filter.
🔸 Combine with volume or trend filters for best results
2. Zero Line Crossovers
When MACD crosses above 0, the shorter EMA is above the longer EMA → bullish. This is typically the sign of a larger trend than crossovers.
When MACD crosses below 0, shorter EMA is below → bearish
🔸 Zero line = baseline momentum direction
🔸 Cross above = bullish trend confirmation
🔸 Cross below = bearish confirmation
3. Histogram Momentum
The histogram is often the first sign of a shift before a crossover happens.
Read it like this:
Histogram growing: Increasing momentum in that direction
Histogram shrinking: Momentum is fading
Histogram changing color (in many indicators): Potential reversal
🔸 Use histograms to get early signals, even before crossovers. Confirmed with volume surge and Price Action.
🔍 Advanced MACD Tricks
📉 4. Divergence Detection
Divergence occurs when price and MACD move in opposite directions.
🔸 Bullish Divergence:
Price makes lower lows
MACD makes higher lows
→ Hidden buying pressure, trend reversal likely
🔸 Bearish Divergence:
Price makes higher highs
MACD makes lower highs
→ Trend weakening, reversal likely
🔹 Confirm with:
RSI, when the lower timeframe RSI is oversold and the higher timeframe MACD is rising, then it's a good sign, and the opposite is true for bears.
Support/resistance zone: draw trendlines either on the volume or price and watch out for retests on the breakout.
Candlestick reversal patterns: some bearish patterns are bullish on indexes because of dollar cost averaging.
