MACD Technical Analysis Buy and Sell Trading Signals
Since the MACD indicator uses 26 and 12 EMA to plot, we shall compare these two EMAs with the MACD indicator to determine how these buy and sell stock indices signals are generated.
MACD Stock Indices Indicator - Example of MACD Technical Indicator
The MACD indicator is a leading indicator meaning it generates indices trading signals that are leading compared to stock indices trading price action as opposed to lagging indicators that lag behind the stock indices trading price.
Buy Indices Trade
A buy indices trade is generated when there's a MACD fast line crosses above signal line. However, as with any leading indicator these stock indices trading signals are prone to whip-saws/fake-outs.
To eliminate the whipsaws it's good to wait for confirmation of the buy or sell trading signals. The confirmation stock indices signal is when the two lines cross above the zero mark, when this happens the buy generated is a reliable indices trade signal.
In the stock indices trading example explained and illustrated below, the Moving average stock indices indicator generated a buy signal, before stock indices trading price started to move up. But it wasn't until the MACD moved above the zero line that the buy stock indices signal was confirmed, and the Moving Averages also gave a crossover indices signal. From experience it's always good to buy after both the MACD lines move above zero center line mark.
Where to Buy using MACD Stock Indices Indicator - Buy Trading Signal
Sell Stock Indices Trade
A sell stock indices signal is generated when there is a MACD fast line crosses below the signal line. However, just like the buy signal, these are also prone to whipsaws/ fake outs.
To eliminate the whipsaws it is good to wait for confirmation of the sell signal. The confirmation is when two lines cross below zero mark, when this happens the sell generated is a reliable indices trade signal.
In the stock indices trading example explained and illustrated below, the Moving average generated a sell confirmed after MACD moved below the zero line at the same time that the Moving Averages gave a crossover indices trade signal.
Where to Sell using MACD Stock Indices Indicator - Sell Trading Signal
