Moving Average Convergence Divergence (MACD)

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices.

Moving Average Convergence Divergence (MACD)

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices.

 


MACD Formula

The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.

Formula for MACD


MACD Interpretation

A fast EMA responds more quickly than a slow EMA to recent changes in a stock's price. By comparing EMAs of different periods, the MACD series can indicate changes in the trend of a stock.

The typical MACD trading rule is to sell when the MACD falls below its signal line and to buy when the MACD rises above its signal line. 


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