Moving average convergence divergence (MACD) is one of the more popular trading indicators among chart watchers but it's rarely sufficient as a standalone tool. MACD is best used with other indicators and forms of technical analysis. Support and resistance areas and candlestick chart patterns, along with the moving average convergence divergence indicator, can help identify potential market reversals.

Understanding MACD

Moving average convergence divergence (MACD) is commonly used by traders and analysts as a momentum indicator. The indicator consists of two 澳洲幸运5官方开奖结果体彩网:exponential moving averages (EMAs): a short-term EMA of 12 and a longer-term EMA of 26. It represents the difference between the two averages as a 澳洲幸运5官方开奖结果体彩网:histogram at the bottom of a chart. MACD overlays the histogram with a nine-day EMA line.

Traders often 澳洲幸运5官方开奖结果体彩网:use the MACD as a divergence indicator to provide an early indication of a tren🦋d reversal.

Support and Resistance

Support and resistance areas can sometimes help in identifying times when a market may reverse course. These commonly occur at market turning points. The situational fact lends further likelihood to the MACD's indication that price may soon change direction if the MACD gives a divergence from price indication at an area identified as a major support or resistance level in a market.

Candlestick Charts

The candlestick was invented by Japanese rice merchants in the 18th century. It's a type of price chart that displays the high, low, open, and closing prices of a security. Each bar or candlestick represents one period of trading, such as minutes, days, weeks, or months. It appears as a rectangle (the body) with small lines at the top or bottom (the wicks). 

A myriad of trading strategies or signals are generated with candlestick charts, with some 澳洲幸运5官方开奖结果体彩网:patterns on a candlestick chart, notifying traders that a reversal might be at hand. The pattern called the evening star is a bearish reversal pattern at the end of an uptrend. The morning star is a 澳洲幸运5官方开奖结果体彩网:bullish reversal pattern that occurs after a downtrend.

Other candlestick patterns that signal market reversals include the doji, 澳洲幸运5官方开奖结果体彩网:hanging man, or bullish or bearish engulfing candle. A trader recognizing one of these candlesti🌠ck patterns at the same time that the MACD shows a divergence from the market's price movement has some corroboration of indicators showing the market may be turning and changing trends.

Traders might also pair the MACD moving averages with 澳洲幸运5官方开奖结果体彩网:stochastic closing price data to indicate places where the two indicators cross, forming a 澳洲幸运5官方开奖结果体彩网:double-cross pattern.

The Bottom Line

The MACD charting indicator is best used hand-in-hand with other types of analysis. Candlestick chart patterns are commonly used to pinpoint technically significant areas and trend reversals. You might want to begin using it with smaller trades and investments until you're sure you've mastered the art or consider consulting with someone familiar with indicators.