The The MACD, or moving average convergence divergence, is a tec... More, or What is a moving average indicator? In technical analysis, ... More convergence divergence, is a technical indicator used to spot a new What is a market trend in trading? A market trend is the ten... More by showing the relationship between three moving averages.
It is used to help identify What are value stocks? A value company is a company that app... More is moving — it can be used as both a What is a trend following strategy? Trend following is a con... More indicator and an oscillator.of , as well as confirming which direction the
(1) MACD line
(2) Signal line
(4) Zero line
The components are derived from the relationship between three different:
- 26 period exponential moving average
- 9 period exponential moving average
- 12 period exponential moving average
26, 9 and 12 are therefore the standard settings when using the MACD indicator.
Deriving the MACD line, signal line and the histogram
|MACD line:||12 period EMA — 26 period EMA|
|Signal line:||The 9-day EMA of the MACD line|
|Histogram:||MACD — Signal line|
How to interpret the MACD
MACD line and signal line cross each other
(1) When the MACD line crosses below the signal line, this indicates that the momentum has reversed to the downside.
(2) When the MACD line crosses above the signal line, this indicates that the momentum is to the upside.
MACD and signal line both cross the zero line:
(2) When they cross below the zero line, this indicates that the momentum of the What is price action in trading? Price action describes the ... More is increasing to the downside.
The histogram in relation to the zero line
(1) When the histogram is below the zero line, that indicates that the MACD line is below the signal line and this indicates downward momentum in price action.
(2) When the histogram crosses the zero line, the MACD line and the signal crossover indicating that the momentum in the price action is reversing.
(3) When the histogram is above the zero line, then the MACD line is above the signal line and this indicates upward momentum in price action.
More on the MACD and technical analysis
Find out how to effectively trade with the MACD using divergence:
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