MACD Technical Analysis Buy and Sell Stock Trading Signals
Since the MACD stock indicator uses 26 and 12 EMA to plot, we shall compare these two EMAs with the MACD indicator to determine how these buy and sell stock signals are generated.
MACD Stocks Indicator - Example of MACD Stocks Indicator
The MACD stock indicator is a leading indicator meaning it generates stock trading signals that are leading compared to stocks price action as opposed to lagging indicators that lag behind the stocks price.
Buy Stock Trade
A buy stock trade is generated when there is a MACD fast line crosses above the signal line. However, as with any leading indicator these stock signals are prone to whipsaws/ fake outs.
To eliminate the whipsaws it's good to wait for confirmation of the buy or sell stocks trading signals. The confirmation stock signal is when the two lines cross above the zero mark, when this happens the buy generated is a reliable stock signal.
In the stocks trading example explained below, the Moving average stock indicator generated a buy stock trading signal, before stocks price started to move up. But it wasn't until the MACD moved above the zero line that the buy stock signal was confirmed, and the Moving Averages also gave a crossover stock 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 Stocks Indicator - Buy Stock Trading Signal
Sell Stock Trade
A sell stock signal is generated when there is a MACD fast line crosses below the signal line. However, just like the buy stock trading signal, these are also prone to whipsaws/ fake outs.
To eliminate the whipsaws it's good to wait for confirmation of the sell stock signal. The confirmation is when the two lines cross below the zero mark, when this happens the sell generated is a reliable stock signal.
In the stocks trading example explained 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 crossover stock signal.
Where to Sell using MACD Stocks Indicator - Sell Stock Trading Signal