Moving Average Convergence/Divergence (MACD)
Developed by Gerald Appel, Moving Average Convergence Divergence (MACD) is
one of the simplest and most reliable indicators available. The
Moving Average Convergence/Divergence (MACD) indicator is calculated by
subtracting the 12-period exponential moving average of a given currency
or commodity from its 26-period exponential moving average. A 9-period exponential
moving average of the MACD itself is usually plotted over this line as a
signal or trigger line. By using moving averages, MACD has trend following
characteristics. In addition, by plotting the difference of the moving
averages as an oscillator, MACD also has momentum characteristics.
There are three techniques commonly used
to interpret the MACD:
Divergence: When MACD moves counter to the direction of the currency
itself, it is a warning that the currency's trend may change.
Centerline Crossover: Some analysts choose to buy or sell when the MACD
goes above or below zero (the centerline).
Trigger line: When the MACD crosses above the slower trigger line, this is
a bullish signal. When the MACD goes below the trigger line, it's a
bearish signal.
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