Moving Averages for Beginners: What are those lines in the middle of the chart and what are they for?
DIF (Yellow Line)
When the DIF is positive, it indicates upward momentum, suggesting a buying opportunity. On the other hand, a negative DIF indicates downward momentum, signaling potential selling points.
2. DEA (Pink Line)
DEA, also known as the Signal Line, is an EMA of the DIF. It smooths out the DIF line, providing a clearer view of the trend. When the DIF crosses above the DEA, it generates a bullish signal, while a cross below indicates a bearish signal. For traders, observing these crossovers helps to time market entries and exits.
3. MACD (Purple Line)
MACD is derived from DIF and DEA. It shows the relationship between two EMAs and is represented by a histogram. The MACD histogram oscillates above and below the zero line, providing information about the strength and direction of a trend. In trading, a rising histogram suggests increasing bullish momentum, while a falling histogram indicates increasing bearish pressure.
