Type of Indicator: Lagging Indicator -Data used in MACD is based on the historical price action of the stock. Since it is based on historical data, it must necessarily “lag” the price.
Consist of 3 components 1) MACD Line FORMULA: EMA 12-EMA 26 2) Signal Line FORMULA: 9-day EMA of MACD Line 3) MACD Histogram: FORMULA: MACD LINE - SIGNAL LINE
Functions 1) Momentum indicator for Bullish or Bearish 2) Helps in determining long or short position 3) Entry ideas
TIPS (Must not be used as stand-alone Indicator) -BUY: When MACD Line Cross over the Signal Line + Reversal Candle/ Pattern -SELL: When Signal Line Cross over MACD Line + Reversal Candle/ Pattern -READY: When the MACD Histogram does not show big changes, ready for incoming big momentum either bullish or bearish
Idea sourced from: -Investopedia -YouTube Rayner Teo: MACD Indicator Secrets: 3 Powerful Strategies to Profit in Bull & Bear Markets