MACD
Technical Analysis
What it means
Moving Average Convergence Divergence: an indicator that subtracts a slow EMA from a fast EMA to show momentum. Crossovers of its signal line hint at turns.
Example
When the MACD line crosses above its signal line while both are below zero, it is a bullish hint -- momentum is turning up even though price is still in a downtrend.
Mistake beginners make
Beginners take every MACD crossover as a trade. In choppy markets, MACD whipsaws back and forth, generating a string of small losses called "death by a thousand cuts."
Related terms
- RSI — Relative Strength Index: a 0-100 line that measures how fast and how much price has moved …
- Moving Average — A line showing the average price over a set number of periods, which smooths out noise and…
- EMA — Exponential Moving Average: a moving average that gives more weight to recent prices, so i…