Moving Average Convergence Divergence MACD indicator – Learn Forex
MACD indicator
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The convergence / divergence of the moving average is an indicator to monitor dynamic trend. Shows the correlation between two moving averages.
The technical indicator Convergence / Divergence of the moving average is the difference between the exponential moving averages of 26 periods and 12 periods. To be clear opportunities for buying and selling, known as the signal line is added in the graph a curve MACD moving average of 9 periods.
The MACD is most effective in larger markets with larger trends. There are three ways to determine trends over MACD: Cruces, oversold conditions / overbought and divergent.
Tips :
The basic MACD to operate is to sell when the MACD falls under the curve. Similarly buy signal is when the MACD is above the curve. It is also common to buy or sell signal when the MACD is above or below 0, respectively.
Overbought and oversold conditions.
The MACD is also useful as an indicator of overbought and oversold. When the moving average exponentially smaller rises sharply distancing long period of exponential moving average for longer period (ie, the MACD rises violently), is almost certain that the price is over reacted promptly and prices will revert to more normal levels.
Divergence.
One sign that the end of the current trend may be near occurs when the MACD diverges from the curve. A divergence occurs when the rise in MACD is making new peaks while the price drops to try to reach new peaks. A difference to the bottom occurs when the MACD is doing as the new minimum price falls reach new andalusia minimal. Both differences are more significant when they occur in the overbought and oversold levels.
Calculation
The MACD is calculated by subtracting from a exponential moving average of a least 12 periods of 26 periods. A simple moving average of 9 periods of the MACD is placed on the graph (called the curve of signal) as a prominent
MACD = EMA (CLOSE, 12)-EMA (CLOSE, 26)
SIGNAL = SMA (MACD, 9)
Where:
EMA-exponential moving average;
SMA – simple moving average;
SIGNAL – the curve of the indicator signal.
This oscillator consists of two exponential averages ranging turning the line of zero (0). These two lines are called MACD (Moving Average Convergence Divergence) and Signal.
Signal line is the exponential average of the MACD line and used to try to determine possible changes in short-term trend.
The MACD is calculated by subtracting a moving average of 12 days the price of one share of its 26-day moving average, also based on the price. The result is an indicator that oscillates above and below zero.
When the MACD is above zero, it means the average of 12 days is higher than the average of 26 days. This situation is bullish as it shows that current expectations (ie the average of 12 days) are more upside to expectations (ie the average of 26 days). This implies a bullish, or upward in the lines of supply / demand.
When the MACD falls below zero, it means the moving average of 12 days is lower than the 26 days, leading to a downward shift in the lines of supply / demand.
In summary, the MACD line provides information on medium and long term trends in the value and the signal line provides information on the behavior of the MACD line at very short notice.
The interpretation of the two lines is:
The buy signal occurs when the line Signal MACD cut the line “from above” to “down”. The signal line when the sale of Signal MACD line cut to the “bottom” to “up”. The greatest value of this oscillator is to confirm that the trend is bullish or bearish.
In summary: There are oscillators that can detect a change in trend at an earlier stage such as RSI, Momentum, or the middle of the crossing. The MACD is useful to confirm that the trend and it will force the medium to long term.
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