Sign in to follow this  
Followers 0
Rick

Moving Average Convergence/Divergence (MACD)

2 posts in this topic

Moving Average Convergence/Divergence (MACD)

Definition:

Moving Average Convergence and Divergence (MACD) is the difference between a fast exponential moving average (fast EMA) and a slow exponential moving average (slow EMA). The name was derived from the fact that the fast EMA is continually converging towards and diverging away from the slow EMA.

Interpretation:

The MACD can be a very helpful technical indicator, and is subject to several conventional interpretations which can all be useful depending on your trading and investment philosophies.

One interpretation is that a positive MACD value is a bullish signal, and a negative MACD value is a bearish signal.

The crossover interpretation posits that the signal line can be used alongside the MACD to determine the appropriate entry and exit point. (The signal line is a moving average of the MACD line). When the MACD falls below its signal line, it can be considered a sell signal. Similarly, a buy signal can be interpreted when the MACD rises above its signal line.

A third popular method of interpretation is that when the MACD is making new highs or lows, and the price is not also making new highs and lows, it signals a possible trend reversal. This type of interpretation is often verified with an overbought/oversold oscillator.

MACD Slope Indicator

The MACD slope indicator is based on the MACD. The MACD slope indicator plots the change in the slope of the MACD signal line. When the slope changes from positive to negative, a red arrow is plotted, possibly indicating prices heading lower. When the slope changes from negative to positive, a green arrow is plotted, possibly indicating higher prices ahead.

0

Share this post


Link to post
Share on other sites

Hello,

Developed by Gerald Appel in the late seventies, the moving average convergence-divergence (MACD) indicator is a momentum indicator simple and most effective available. The MACD becomes two trend-following indicators, moving averages, a momentum oscillator by subtracting the longer moving average from the shorter moving average. As a result, the MACD offers the best of both worlds: monitoring trends and momentum. The MACD fluctuates above and below the zero line, such as moving averages converge, intersect and separate. Merchants can find the signal line crosses, crossovers and divergences central to generate signals. Because the MACD is unlimited, is not particularly useful in identifying overbought and oversold levels.

1

Share this post


Link to post
Share on other sites
Sign in to follow this  
Followers 0