MACD stands for Moving Average Convergence Divergence. Let's break down each component.

M: Moving

A: Average

C: Convergence

D: Divergence. Let's look at what each term means in practice.

In short, it is a technical indicator that tracks the convergence and divergence of moving averages.

It was designed to identify buy and sell signals based on moving average trends.

MACD consists of the MACD line and the Signal line. Here is a quick look at the formula.

*MACD Line = Short-term EMA - Long-term EMA (typically 12-period short-term EMA and 26-period long-term EMA)

*Signal Line = X-period EMA of the MACD Line (typically a 9-period EMA)

*Oscillator: MACD Line - Signal Line

The formula may look complex, but you only need to remember two core rules:

① When the MACD line crosses below the Signal line, consider selling (Death Cross).

② When the MACD line crosses above the Signal line, consider buying (Golden Cross).

MACD is a secondary indicator. Use it alongside other technical tools and market data.

No matter how high the probability, no indicator is 100% foolproof.

Next, let's explore additional technical indicators to further improve your edge.