MACD Technical Analysis Buy and Sell 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 & sell signals are generated.

MACD Indicator - Example of MACD Indicator

The MACD indicator is a leading indicator meaning it generates signals that are leading compared to price action as opposed to lagging indicators that lag behind the cfd price.

Buy Trade

A buy cfd trade is generated when there is a MACD fast line crosses above the signal line. However, as with any leading indicator these cfd signals are prone to whip-saws/fake outs.

To eliminate the whipsaws it's good to wait for confirmation of the buy or sell signals. The confirmation cfd signal is when the two lines cross above the zero mark, when this happens the buy generated is a reliable trade signal.

In the cfd example shown below, the Moving average cfd indicator generated a buy cfd signal, before price started to move up. But it wasn't until the MACD moved above the zero line that the buy cfd signal was confirmed, and the Moving Averages also gave a crossover cfd 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 Indicator - Buy Signal

Sell Trade

A sell signal is generated when there is a MACD fast line crosses below signal line. However, just like the buy cfd signal, these are also prone to whipsaws/ fake outs.

To eliminate the whipsaws it's good to wait for confirmation of the sell signal. The confirmation is when the 2 lines cross below the zero mark, when this happens the sell generated is a reliable trade signal.

In the cfd example shown 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 cross over trade signal.

Where to Sell using MACD Indicator - Sell Signal