Moving Average Convergence/Divergence
Last updated
Was this helpful?
Last updated
Was this helpful?
Moving average convergence/divergence(MACD) indicator graphically describes the mathematical difference between fast and slow exponential moving averages. The third line is called a “signal line”. Common periods of moving averages are: 26 for a slow EMA, 12 for a fast and 9 for a signal line.
Fast EMA - Slow EMA
Divergence/Convergence - Divergence/Convergence pattern is a form of price action when new high(low) on the price scale not confirmed with a new high of MACD. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.
Crossover - Crossover pattern occurs when MACD value crosses the signal line upward or downward. This signal can be used as a trigger to open buy/sell position.
Crossing zero line - this is a trend reversing signal and it can be very useful in case of determining a correction of existing trend, beginning of a new trend wave or starting a new trend.
