MACD (Moving Average Convergence / Divergence) is a technical indicator that uses the convergence and divergence between the short-term (commonly 12-day) exponential moving average and the long-term (commonly 26-day) exponential moving average of closing prices to make judgments about buying and selling opportunities.

The MACD indicator is one of the most famous trend-following indicators. Its main characteristic is its stability. While this lack of excessive sensitivity can be a drawback for short-term trading due to its slowness, it also allows it to provide relatively reliable trend indications in longer cycles and with larger datasets.

When MACD turns from negative to positive, it is a buy signal. When MACD turns from positive to negative, it is a sell signal. When MACD changes at a large angle, it indicates that the gap between the fast moving average and the slow moving average is widening rapidly, representing a major trend shift in the market.

Usage Method: As the stock price rises, MACD turns red, meaning the white line crosses above the yellow line (don\’t buy yet). Subsequently, as the stock price falls, the DIF (white line) approaches the MACD (yellow line). When the white line and yellow line converge (about to turn green but hasn\’t yet), at this point, you only need to coordinate with the daily K-line. If the K-line shows a stop-falling signal at this time, such as closing with a Yang line, a doji, etc. (Note: start monitoring the market when the white and yellow lines are about to converge, observing the selling pressure), if it can stop falling at this time, it is called a \”bottom divergence.\”

Bottom divergence is the best time to buy! When the stock price falls from a high level and MACD turns green, and then rebounds, at this time when the DIF (white line) and MACD (yellow line) converge (about to turn red but haven\’t yet), if there is resistance, such as closing with a Yin line, a doji, etc., it may be a \”top divergence,\” which is the last good opportunity to sell.

MACD Divergence Exit Method:

1. The stock price reaches a new high, MACD reaches a new high, the trend is accumulating momentum, but the top signal is obvious, closing with a long upper shadow, and MACD has no divergence. When you see this pattern, you should exit.
2. The stock price reaches a new high, MACD reaches a new high, but there is no divergence, and the trend continues. In this case, you don\’t need to exit.
3. The stock price reaches a new high, but the MACD histogram does not reach a new high, and the trend cannot continue. In this case, you should exit first.
4. The stock price reaches a new high, and MACD diverges. In this case, you should exit.
5. The stock price reaches a new high, MACD has no divergence, but the market is very crazy. It is best to exit first during the rally.
6. The stock price reaches a new high, but the MACD histogram does not follow. At this time, we should exit with a small loss to protect our principal.