Moving Average Convergence Divergence (MACD)

This indicator was created by Gerald Appel in the 1960's by assessing the correlation between the two EMA (Exponential Moving Average) different time periods. The combination of period EMA is more commonly used is the EMA (26) with EMA (12). MACD technique is to change the moving averages are lagging indicators characterized essentially, a form of leading indicator (momentum oscillator). Chart oscillator is divided into two sections that do not have a limit as low or high limit by a line level 0 (zero).

In the oscillators we will see two lines called the MACD line and signal lines. Expressed as a buy signal if the MACD line cut to the top of the line signal. While the sell signal is obtained when the MACD line cut down the signal line (see picture).

This technique is similar to the method on indicators doublecross Moving Averages, but the MACD signal produces a more responsive to price movements than the Moving Averages. MACD indicator line on the chart are in line oscillator is also not like Moving Averages are arriving near the stock price. Thus MACD also serves as another oscillator that can indicate overbought and oversold.

The MACD line is the result of the difference of two EMA, EMA (12) and EMA (26) which uses the closing price. While the signal line which is slower than the MACD line is the moving average of the MACD line it self. These signal lines generally have the shortest period, the standard recommended Gerald Appel is the period of 9 days. If this period is replaced with a shorter signal it will produce a faster or more responsive. Instead a longer period will give the signal a little slow, but more muffled bad signals.

The method uses the deviation of stock prices by the line indicator can also be applied in the MACD. When the MACD line began to decline in the overbought area while increasing the price movement, then it indicates a bearish signal. Conversely, if the MACD line in oversold area increasing to declining prices indicate a bullish signal.

MACD formula =

Lines MACD = EMA (12) - EMA (26) ; Signal line = EMA (9) ari MACD