BQLearning: The Significance Of MACD Indicator
(Source: BloombergQuint)

BQLearning: The Significance Of MACD Indicator

BQ Learning is a special show that seeks to demystify financial markets, economic theories, legal processes and political structures.

In this series, we explain how technical analysis works; how to identify trading opportunities through it and decode various concepts associated with it.

The Moving Average Convergence Divergence, more commonly known as the MACD, is an oscillating indicator. It’s used by traders to determine the trend direction, momentum and potential reversals.

The MACD is the difference between a 26-period and 12-period exponential moving average of closing prices. A nine-day exponential moving average, called the “signal line” is plotted on top of the MACD to show buy/sell opportunities.

  • If the MACD line stays above the signal line at a time the stock prices are rising, it indicates a buy opportunity for a trader.
  • If the MACD line stays below the signal line when stock prices are falling, it indicates a sell opportunity.

Crossovers

  • A bullish crossover occurs when the MACD turns up and cuts the signal line from below.
  • A bearish crossover occurs when the MACD turns down and cuts the signal line from above.

Watch the full video here to know more:

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