Moving average convergencedivergence oscillator (macd) is a simple and effective momentum indicator. Macd turns two trend-following indicators, moving averages (12 and 26 days), into a momentum oscillator by subtracting the longer moving average from the.
there are three main components of the macd shown in the picture below macd the 12-period exponential moving average (ema) minus the 26-period ema.
the main, slower line is the macd line, while the faster line is the signal line. If the two moving averages come together, they are said to be converging and if they move away from each other they are diverging. The difference between the two lines is represented on the histogram.
The fast line (macd line) is a graphical interpretation of the difference between the original fast and slow moving averages. The difference between the fast and slow emas is also displayed in the chart. There is also a signal line in the chart (sometimes called slow).
macd triggers technical signals when it crosses above (to buy) or below (to sell) its signal line. The speed of crossovers is also taken as a signal of a market is overbought or oversold.
The absolute value of macds main line will also be used to confirm position closure the signal is confirmed if this value is greater than closelevel (in points).