Moving Average Convergence/Divergence
Under the Hood
MACD is calculated by subtracting the 26-period EMA from the 12-period EMA. A 9-period EMA of the MACD line (signal line) is plotted on top to generate trading signals.
In Practice
Buy signals occur when the MACD crosses above the signal line. Sell signals occur when it crosses below. Divergences between MACD and price indicate potential reversals.
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