3 Ways to Use the MACD Indicator: 👉

1⃣ How to use the MACD indicator to observe price trends?
2⃣ How to use MACD golden cross and death cross to identify buy and sell points?
3⃣ How to spot trend reversal points through MACD divergence?

1. How to use the MACD indicator to observe price trends?

The simplest way to use the MACD indicator is to observe trends in financial product trading, most commonly in forex and stock trading. There are two types of trends in trading: uptrend and downtrend.

A: Uptrend: When both the fast line and the slow line are above the zero line, the product is generally in an uptrend.
B: Downtrend: When both the fast line and the slow line are below the zero line, the product is generally in a downtrend.

2. How to use MACD golden cross and death cross to identify buy and sell points?

Using the MACD indicator to find buy and sell points is the most common analysis method. By identifying golden crosses or death crosses, we can find long and short entry points. The following example uses EUR/USD:

A: When the fast line (blue line) breaks above the slow line (orange line) from below, it is called a golden cross and is a good reference for a buy or long signal.
B: When the fast line (blue line) falls below the slow line (orange line) from above, it is called a death cross and is a good reference for a sell or short signal.

· MACD Golden Cross
· MACD Death Cross

3. How to spot trend reversal points through MACD divergence?

This is an advanced usage of the MACD indicator. When the price trend and the MACD indicator show inconsistent trends, there is a chance of MACD divergence. Simply put, investors' sentiment and outlook on the price trend have changed, and they believe the price of the financial product does not match its actual value.

The appearance of MACD divergence is a warning and can be classified into two types, providing investors with potential buy or sell signals:

A: When each price high is higher than the previous, but each MACD line high is lower than the previous, a bearish divergence is formed. This indicates the momentum of the price increase is weakening, and the market is skeptical about the further price rise. Therefore, a death cross after a bearish divergence can be regarded as a sell/short signal.

B: When each price low is lower than the previous, but each MACD line low is higher than the previous, a bullish divergence is formed. This indicates that the downtrend is slowing, and the market believes the subsequent price drop may be an opportunity for repurchase. Therefore, a golden cross after a bullish divergence is considered a buy/long signal.

· Bearish Divergence (Top Divergence)
· Bullish Divergence (Bottom Divergence)