MACD Technical Analysis Buy & Sell Trading Signals

Since MACD indicator uses 26 and 12 EMA to plot, we shall compare these 2 EMAs with MACD indicator to identify how these buy & sell signals are generated.

MACD Indicator - Example of MACD

The MACD indicator is a leading indicator meaning it generates signals that are leading compared to price action as opposed to lagging indicators which lag behind the price.

Buy Trade

A buy trade is generated when there is a MACD fastline crosses above signal line. However, as with any leading indicator these signals are prone to whip-saws/fake-outs.

To eliminate the fake outs it's good to wait for confirmation of the buy or sell trade signals. The confirmation trading signal is when the 2 lines cross above zero line, when this happens the buy generated is a reliable trade signal.

In the exemplification explained & shown below, the MAs indicator generated a buy signal, before trading price started to head up. But it wasn't until the MACD moved above zero mark that the buy trade signal was confirmed, & the MAs Moving Averages also gave a cross over signal. From experience it's always good to buy after both the MACD lines move above zero center line mark.

Where to Buy using MACD Indicator - Buy Trade Signal

Sell Indices Trade

A sell signal gets derived & generated when there is a MACD fast line crosses below the signal line. However, just like buy signal, these are also prone to whipsaws/ fake-outs signals.

To eliminate the fake outs it is good to wait for confirmation of the sell trade signal. The confirmation is when 2 lines cross below zero line, when this happens the sell signal generated is a reliable trade signal.

In the exemplification explained & shown below, the MAs Moving Averages generated a sell signal confirmed after MACD moved below the zero mark the same time that the MAs Moving Averages gave a crossover trade signal.

Where to Sell using MACD Indicator - Sell Trade Signal

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