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Learnchevron_rightStrategieschevron_rightMACD Strategy
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MACD Strategy

Trade based on MACD line crossovers and histogram patterns

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What Is This Strategy?

MACD (Moving Average Convergence Divergence) combines trend-following and momentum in one indicator. It shows the relationship between two moving averages and includes a signal line and histogram.

How It Works

  1. MACD Line = 12-day EMA minus 26-day EMA
  2. Signal Line = 9-day EMA of the MACD Line
  3. When MACD crosses above Signal Line = Buy Signal
  4. When MACD crosses below Signal Line = Sell Signal
  5. Histogram shows the difference between MACD and Signal lines

MACD Strategy - Decision Flow

Visual representation of the strategy logic

Price Update
Condition

Calculate MACD & Signal Line

MACD > Signal?

NoYes

Was below before?

NoYes
Entry

BUY Signal

Bullish crossover

Was above before?

NoYes
Exit

SELL Signal

Bearish crossover

Action

Continue monitoring

Press enter or space to select a node. You can then use the arrow keys to move the node around. Press delete to remove it and escape to cancel.
Press enter or space to select an edge. You can then press delete to remove it or escape to cancel.
Condition Check
Buy Signal
Sell Signal
Action

Key Parameters

Fast EMA
Fast exponential moving average period
12
Slow EMA
Slow exponential moving average period
26
Signal Period
Signal line period
9

When to Use

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Best For

  • • Trending markets
  • • Confirming trend direction
  • • Finding momentum shifts
cancel

Avoid When

  • • Sideways markets
  • • Very volatile conditions
  • • Low-volume stocks

Risks & Limitations

warning

Be Aware

  • • Lagging indicator - signals come after the move starts
  • • Can produce false signals in choppy markets
  • • Multiple whipsaws possible during consolidation

Example Trade

Scenario

NVDA is consolidating. The MACD line crosses above the signal line and histogram turns green.

BUY
Reasoning

Momentum is shifting bullish. The histogram confirms increasing buying pressure.

Ready to Test This Strategy?

Backtest this strategy on historical data to see how it would have performed.

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