MACD Indicator
What is the MACD Indicator?
The Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator developed by Gerald Appel in the 1970s. It shows the relationship between two exponential moving averages (EMAs) of a security's price.
Signal Line = 9-period EMA of MACD Line
MACD Histogram = MACD Line - Signal Line
Example: MACD indicator on NIFTY 50 daily chart
How to Use MACD for Trading
3 Primary Trading Signals:
1. MACD Line Crossover
Bullish Signal: When MACD line crosses above Signal line
Bearish Signal: When MACD line crosses below Signal line
2. Zero Line Crossover
Bullish: MACD crosses above zero (12-EMA > 26-EMA)
Bearish: MACD crosses below zero (12-EMA < 26-EMA)
3. Histogram Divergence
Bullish Divergence: Price makes lower low but MACD makes higher low
Bearish Divergence: Price makes higher high but MACD makes lower high
Example: Classic bullish divergence pattern
Optimal MACD Settings
| Timeframe | Recommended Settings | Best For |
|---|---|---|
| Intraday (5-15 min) | (5,13,1) | Scalping |
| Swing (1-4 hrs) | (12,26,9) | Standard trading |
| Positional (Daily+) | (21,50,9) | Long-term trends |
Pro Tip:
Combine MACD with RSI (Relative Strength Index) for confirmation - look for MACD crossovers when RSI is between 40-60 for higher probability trades.
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