MACD (Moving Average Convergence Divergence)

The MACD is the difference between a 26 day and a 12 day exponential moving average. A 9 day exponential moving average of the MACD called "the signal line" is plotted on top of the MACD to show buy/sell signals.

In sideways markets, buy when the MACD rises above its signal line, sell when the MACD falls below its signal line.

MACD Divergence:

In a trending market, the MACD is used to idenfify market tops or market bottoms. A bearish divergence occurs when prices make a new high while the MACD is lower. A bullish divergence occurs when prices make a new low while the MACD is higher.