MACD Technical Analysis Buy and Sell Trading Signals
The MACD indicator utilizes the 26 and 12 EMA for plotting: therefore, we will compare these two EMAs with the MACD indicator to determine how the buy and sell signals are generated.
MACD Indicator - Example of MACD
The MACD is a leading indicator. It gives you signals before price action moves, unlike other technical indicators that lag behind.
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 reduce false signals, it's advisable to wait for confirmation of the buy or sell indicators. The confirmation trading signal occurs when the two lines intersect above the zero line, which indicates that a generated buy signal is trustworthy.
In this example below, the moving averages tool gave a buy hint. Price then rose. The signal confirmed when MACD crossed above zero. Moving averages also crossed. From practice, wait for both MACD lines above the zero line before buying.
Where to Buy using MACD Indicator - Buy Signal
Sell Indices Trade
You get a sell signal when the MACD fast line crosses below the signal line. But, just like buy signals, these can still give you false alarms.
To avoid false signals, it is advisable to wait for confirmation of the sell signal. Confirmation occurs when two lines intersect below the zero line: when this happens, the generated sell signal is considered reliable.
As shown in the example below, the MAs Moving Averages gave a sell signal after the MACD went under zero, at the same time the MAs Moving Averages crossed over.
Where to Sell using MACD Technical Indicator - Sell Signal
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