What is MACD?
MACD is the abbreviation of Moving Average Convergence/Divergence. It was created by Gerald Appel in 1979. It includes two lines and a bar chart, a total of three signals, namely DIFF line, DEA line and MACD. Red and green column lines.
The three signals are generated as follows:
DIFF线 = EMA12 – EMA26 # 黄线，也叫快线或macd line
DEA线 = EMA(DIFF, 9) # 蓝线/红线，也叫慢线或signal line
MACD红绿柱线 = (DIFF线 – DEA) * 2 # 也叫macd histogram, 柱线的高低反应多空能量的强弱
Description of the three signals:
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The DIFF line represents the fast line (short-term). If it is above the zero axis, it indicates that the bulls are strong; if it is below the zero axis, it indicates that the shorts are strong.
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The DEA line represents the slow line (long-term). If it is above the zero axis, it indicates that the bulls are strong; if it is below the zero axis, it indicates that the shorts are strong.
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MACD red and green bars: The red bar represents that the difference between the two curves is positive, and the green bar represents that the difference between the two curves is negative. The bar chart reflects the potential energy of the current trend.
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Zero axis: MACD’s long-short dividing line
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Golden Cross: The fast line exceeds the slow line, that is, the DIFF line breaks through DEA from bottom to top, and the MACD correspondingly changes from the green column to the red column, which is a reference buy signal.
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Death Cross: The slow line exceeds the fast line, that is, the DIFF line falls below DEA from top to bottom, and the MACD correspondingly changes from the red column to the green column, which is a reference selling signal.
It can be seen that the MACD indicator can be used to study trends and the strength of the trend by utilizing the convergence and separation between the short-term exponential moving average and the long-term exponential moving average of closing prices.
Tesla’s stock price and corresponding MACD indicator chart are shown below.
MACD indicator calculation: Use talib.MACD() for calculation.
MACD application
The MACD indicator is explained as follows:
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MACD is below the zero axis, which means short positions are strong. If the histogram continues to grow from large to small below the zero axis, it means that the decline is getting smaller.
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MACD above the zero axis indicates bullish strength. If the histogram continues to grow from large to small on the zero axis, it means that the increase is getting smaller.
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As far as the unilateral trend is concerned, if the red and green histograms start to become shorter and shorter, it reflects that the power of the stock price to rise or fall is getting weaker and weaker.
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When DIFF and DEA are both above the zero axis, it is a golden cross above zero. The market as a whole is in a bull market, and the golden cross is the icing on the cake, which often means the beginning of a new wave of big gains; when DIFF and DEA are both below the zero axis, it is a sub-zero golden cross. It is often just a short-term rebound in the short market, so its stability and reliability are low, and its intensity is not strong.
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When DIFF and DEA are both above the zero axis, it is zero (the cross on the axis) is often just a callback in the bull market. It is not reliable and the adjustment range will not be too large; when DIFF and DEA are both below the zero axis, it is zero ( axis), it often means the beginning of a new wave of decline, and the reliability is extremely high, and the decline is also large.
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Deviation : There is a large gap between the fast line and the slow line; Divergence: The trend of the stock price runs counter to the trend of the indicator.
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Common misuse: Many people use MACD as an indicator of trend reversal. In fact, the red and green bars only indicate that the trend has weakened, but do not mean that the trend has turned.
According to the above description, there are several ways to play.
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