What Does Convergence Divergence Mean?
Two major events to look for with the MACD are the convergence and the divergence of the two moving average lines. Divergence is a momentum-building event that indicates that increased rates of return are imminent. Convergence is the opposite effect, essentially a slowing down of the rates of return in the near term. If the moving averages are pointing up, that means we can expect an upswing in prices. The opposite is true for a downswing in prices. What about the Zero Line? We have a major bullish indication when the moving averages are above the zero line. This essentially means we are more than just expecting an upswing. We see a seismic shift for a new bull market so long as the lines move and stay above the zero line. If you back-test a strategy that proceeds to buy a market anytime the MACD lines move above the zero line, you will find very good results. Your next step would be to rule when to take profits or sell losses short. The greatest bullish indication is, of course, when
