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What is MACD on Trading Charts?

MACD stands for Moving Average Convergence Divergence and is a popular technical indicator used in trading analysis. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA, and then plotting a nine-period EMA on top of that as a signal line.

Traders use the MACD to identify potential buy and sell signals based on the crossover of the signal line and the MACD line. When the MACD line crosses above the signal line, it is considered a bullish signal, and traders may look to enter a long position. Conversely, when the MACD line crosses below the signal line, it is considered a bearish signal, and traders may look to enter a short position.

The MACD can also be used to identify divergence between the price action and the indicator, which may signal a potential trend reversal. Overall, the MACD is a useful tool for traders to incorporate into their analysis when making trading decisions.

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