MACD is a trend-following momentum indicator that shows the relationship between two moving averages to highlight shifts in momentum.
MACD stands for Moving Average Convergence Divergence. It is a trend-following momentum indicator that reveals changes in the strength and direction of a price trend.
MACD is built from two exponential moving averages, typically the 12-period and 26-period. The MACD line is the difference between them, and a 9-period signal line is plotted on top of it.
When the MACD line crosses above the signal line, it is often read as bullish momentum; a cross below is read as bearish. The histogram shows the gap between the two lines, making momentum shifts easier to see.
Like all indicators, MACD lags price because it is based on averages. Traders combine it with other tools to avoid false signals during choppy, sideways markets.
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