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1. Enter the ticker symbol for a stock into the stock-charting software and plot MACD using default settings.
2. Observe the interaction between the fast and slow lines. When the fast signal line rises above and crosses the slow MACD line, it means buyers are starting to dominate and a trader might consider buying that particular stock. When the fast line falls below and crosses the slow MACD line, it means sellers are starting to dominate and a trader might consider selling that particular stock.
3. Observe the position of the fast and slow lines on the MACD chart. Whenever the MACD is above the 0 line, it indicates upward price momentum because the short-term average is above the long-term average. This is considered a strong buying signal. The opposite is true when the MACD line falls below the 0 line, indicating a strong selling signal. Many traders use this as a confirmation of the signal line crossover before making a buying or selling decision.
4. Compare the MACD line to that of the stock price. A divergence between these two lines usually indicates the end of the current price trend.