The primary method of interpreting the MACD is with moving average crossovers. When the shorter-term 12-period exponential moving average (EMA) crosses over the longer-term 26-period EMA a potential buy signal is generated; this is seen on the Nasdaq 100 exchange traded fund (QQQQ) chart below with the two purple lines.
Remember that the MACD line (the blue line) is created from the 12-period and 26-period EMA. Consequently:
A possible buy signal is generated when the MACD (blue line) crosses above the zero line.
When the MACD crosses below the zero line, then a possible sell signal is generated.
The prior potential buy and sell signals might get a person into a trade later in the move of a stock or future. Another potential buy and sell signal is shown in the graph below of the Nasdaq 100 exchange traded fund QQQQ:
A potential buy signal is generated when the MACD (blue line) crosses above the MACD Signal Line (red line).
Similarly, when the MACD crosses below the MACD Signal Line a possible sell signal is generated.
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