MACD – Moving Average Convergence / Divergence
MACD refer to Moving Average Convergence / Divergence. This technical indicator is often used by traders to illustrate the relationship of a 26-day and 12-day Exponential Moving Average.
Moving Average Convergence / Divergence or better known as the MACD is an indicator of a relatively simple and has a good level of reliability. Originally MACD was used by Gerald Appel MACD as a tool in analyzing trends and changing direction daily until the weekly cycle.
MACD uses two Exponential Moving Average (EMA) to indicate overbought or oversold condition that fluctuates above and below the zero line (zero line). On the MACD there are no absolute figures such as restrictions on Stockhastic Oscillator which typically uses the limits 30-70.
Standard MACD consists of two lines. The first line known as the MACD line is the result of the difference of the two EMA EMA 12 and EMA 26. This line is usually served with a thicker line. Companion is a trigger line. This line is the EMA line 9 and is usually served with a thinner line or dashed.
Because the MACD line derived from the difference between the two EMA, there will be two possible outcomes are positive and negative. Positive meaningful indications of bullish, Negative meaningful indications of bearish.
Like moving averages, MACD is also commonly used to identify buy and sell signals and changes in trend. A sell signal is indicated when the MACD line moves to cut from the top down slow line (Dead Cross), and vice versa for a buy signal is indicated when the MACD line moves to cut from the top down slow line (Golden Cross).
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