The Moving Average Convergence Divergence, also called the MACD, is a trend-following momentum indicator used widely by traders. Although the MACD is a lagging indicator, it can be very useful in identifying possible trend changes.
BTC/USDT daily chart. Source: TradingView
The MACD oscillates above and below a zero line, also known as the centerline. The shorter moving average is subtracted from a longer moving average to arrive at the value of the MACD. A signal line, which is the exponential moving average of the MACD completes the indicator.
The blue line is the MACD and the red line is the signal line. When the blue line crosses above the red line, it is a signal to buy and when the blue line falls below the red line, it is a trigger to sell. A cross above the centerline is also a buy signal.
Let’s have a look at how to use the indicator for better entries and exits from a variety of positions.