MACD in depth: DIF, DEA and the bars

This is lesson-collection #05 of Stock Knowledge 101, merging the former kb11–kb15 (5 mini-lessons). Read in order.

MACD: DIF, DEA, red/green bars

This is Lesson 11/31 of Stock Knowledge 101 〔Indicators〕.

• MACD measures momentum via the gap between fast and slow MAs.
• DIF(fast)=EMA12−EMA26; DEA(slow)=9-day smooth of DIF; bars=2×(DIF−DEA).
• Growing red bars = strengthening bull momentum; growing green = bear; shrinking bars = fading momentum.
• Above the zero line is bullish territory, below is bearish; a cross above the line is more reliable.

📌 MACD trio: line for direction (DIF/DEA), bars for strength, axis for territory.

MACD crosses & divergence

This is Lesson 12/31 of Stock Knowledge 101 〔Indicators〕.

• Golden cross (DIF over DEA, esp. above zero) = bullish; death cross opposite.
• Top divergence: price new high but DIF/bars not → upside weakening, watch for top.
• Bottom divergence: price new low but DIF/bars not → downside weakening, watch for bottom.
• Divergence often leads price reversal by days~weeks; it’s a left-side warning tool.

📌 MACD’s strongest use is divergence, not the bare cross; divergence + low-volume confirmation is steadier.

DMI trend-direction indicator

This is Lesson 13/31 of Stock Knowledge 101 〔Indicators〕.

• DMI has +DI(up momentum), −DI(down momentum), ADX(trend strength).
• +DI over −DI = bullish cross; −DI over +DI = bearish cross.
• ADX>25(20): trend strong, trend-following works; ADX<20: range-bound, don’t force it.
• ADX falling from high = trend weakening; ADX>50 turning = late-stage warning.

📌 ADX tells whether to do trend at all; +DI/−DI tell the direction; pair with MA/volume.

Reading the MACD chart

This is Lesson 14/31 of Stock Knowledge 101 〔Indicators〕.

• DIF(fast)=EMA12−EMA26 most sensitive; DEA(slow)=9-day smooth for confirmation; bars=2×(DIF−DEA).
• Golden cross (DIF over DEA) bullish, death cross bearish; crosses above zero are more reliable.
• Growing red bars = bull momentum building; green = bear; shrinking bars = momentum fading (possible turn).
• Strongest use is divergence: price new high but DIF/bars not = top warning; new low but not = bottom.

📌 MACD essence is ‘divergence + zero-line position’, not blind cross-chasing; it lags price, used to confirm.

Reading the volume chart

This is Lesson 15/31 of Stock Knowledge 101 〔Volume-Price〕.

• Volume = shares per unit time, participation; price is result, volume is evidence, no-volume rallies fake.
• Price up + vol up = healthy; up + vol down = weakening; down + vol up = panic; down + vol down = easing.
• Low-volume launch at lows = possible start; high-volume stall at highs = distribution warning.
• Volume divergence: price new high but volume/momentum not = exhaustion; compare to its own recent average.

📌 Volume verifies the trend; any breakout without volume support, treat as fake first; exclude ex-rights days.

⚠️ This article is a methodological illustration and does not constitute any investment or trading advice. Markets are risky; decide with caution.