What is MACD? What are the components of MACD

A standard MACD chart consists of four parts: two lines, one column, and one zero axis

1. DIF line (fast line) 2. DEA line (slow line) 3. MACD histogram (energy column) 4. Zero axis

Visually displays the distance difference between the fast and slow lines. The height and direction changes of the histogram are very important

How to use MACD:

Change of energy column: Insight into the strength of momentum

Histogram growth: Indicates strengthening momentum for upward (green column) or downward (red column) movements.

· Histogram shortening: Indicates that the current directional momentum is weakening.

· 'Peaks' and 'Valleys': The turning point where the histogram changes from elongation to shortening often leads price turning points and can serve as an early warning.

· For example: The price is still rising, but the green bars have started to become solid and shorten, which may indicate weakening upward momentum.

Energy decay, there is a demand for correction, used in larger timeframes, less used in smaller timeframes.

Divergence: A warning signal that the trend may reverse (very important!).

Divergence: Price makes a new high, but the MACD DIF line (or histogram) high is lower than the previous one.

· Meaning: The momentum of the price increase is insufficient, and the uptrend may soon come to an end.

· Signal: A potential trend reversal warning, especially more reliable after multiple divergences.

Multiple divergences, trend reversal

· Bottom divergence: Price makes a new low, but the MACD DIF line (or histogram) low is higher than the previous one.

· Meaning: The momentum of the price decline is weakening, and the downtrend may soon come to an end.

· Signal: A potential trend reversal warning.