Moving Average Convergence Divergence (MACD)

Moving Average Convergence Divergence (MACD)

This indicator was generated by Gerald Appel as the difference between two exponentially smoothed averages (EMA).It’s one of the simplest and most reliable indicators available.Although there are three moving averages mentioned you will only see two lines one fast and one slow, if the faster signal line crosses above the slower line then a buy signal is generated and vice versa.There are three techniques commonly used to interpret the MACD:1) Crossovers, When the MACD falls below the Signal line, it is a bearish signal indicating that it may be time to sell. 2) Conversely, when the MACD rises above the Signal line, the indicator gives a bullish signal, suggesting that the price of the security is likely to experience upward momentum.3) Divergence, when the security price moves counter to the MACD it signals the end of the current trend.4) Zero Line Crossover, A crossing of the MACD line up through zero (the centerline) is interpreted as bullish, or down through zero as bearish. Some analysts choose to buy or sell when the MACD goes above or below zero.
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