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Among the approaches used by investors to make decisions in the stock market, MACD is a technical indicator that is used by many traders to identify key points or trends on the charts in order to enter or exit positions. The information provided by historical data on an asset can be analysed from different perspectives. For this reason, MACD attempts to provide insight into a stock's price trend and anticipate its movement with a signal. In this article, we will tell you what MACD is, how and what it is used for.


The MACD indicator, short for Moving Average Convergence Divergence, is a very popular technical indicator in trading circles. Its purpose is to detect a trend reversal, much like RSI or moving averages. To do this, MACD represents the gap between two exponential moving averages, which gives more weight to the most recent data and therefore is more responsive. To utilise its full potential, a trader compares its movement to an exponential moving average that takes into account the shorter time unit. It is known as the signal line.

If the MACD crosses its signal line, it can be interpreted as a buy or sell signal, depending on the direction. If the MACD crosses the signal line upwards, a trader may be tempted to initiate a buy position, while if the indicator crosses the signal line downwards, it is possible to sell the asset. Finally, the MACD can also be useful when there is a divergence between the price trend of an asset and the trend of an indicator, similar to the RSI and its overbought or oversold zone.


When the MACD indicator crosses the signal line at the top, the result can be considered a buy signal. This signal will be even stronger if it stays above the line for a long time, and vice versa, if the MACD crosses the signal line in a downward direction, the result can be interpreted as a sell signal. Here, the signal will be stronger the longer MACD stays below the line. On the other hand, the MACD indicator is attractive to traders because it identifies potential bullish and bearish divergences in the market, just like the RSI.

When price continues to rise upwards and the MACD continues to fall downwards, a bearish divergence occurs, which is a bearish reversal signal. This event occurs at the end of a bullish trend. Conversely, if the stock price registers increasingly lower lows and the MACD indicator at the same time registers increasingly higher lows, we experience a bullish divergence, which can be interpreted as a bullish reversal signal. This scenario occurs at the end of a downtrend.


Like all technical indicators, MACD is not a reliable predictor of changes in an asset. Especially since the purpose of this indicator is to reactively anticipate a trend reversal. Therefore, it is very important to set parameters for each period to improve the use of the data and avoid a series of false signals. When applying MACD in your trading, it is worth remembering that its results depend on correct settings and careful analysis.

Finally, if you decide to use MACD in your trading, you should wait for confirmation in the form of a sufficiently long period when the indicator is above or below its signal line. This approach will help to reduce the probability of errors and increase the accuracy of your forecasts.


MACD is a highly effective tool for identifying reversal zones with better anticipation than simple moving averages. Its use allows traders to more accurately capture moments of trend changes. The presence of divergences between a stock's price trend and MACD provides an additional argument in favour of early perception of potential bullish or bearish signals, which can significantly improve the accuracy of forecasts.

However, the indicator requires a run-in period to be adjusted so that it adapts as best as possible to the asset being analysed. This requires time and careful observation of MACD behaviour in different market conditions. Finally, the indicator should be combined with other indicators to confirm each scenario with maximum probability. This integrated approach allows you to significantly reduce risks and increase confidence in your trading decisions.


Using the MACD indicator can significantly improve the efficiency of your trading strategy by providing more accurate signals for entering and exiting positions. This tool allows you not only to identify trend reversals, but also to confirm them, which is especially important in volatile market conditions. However, remember that the success of using MACD depends on correct settings and the ability to combine it with other indicators and methods of analysis. With proper practice and care, MACD can become a reliable assistant in making informed trading decisions, helping you achieve your financial goals.