MACD stands for Moving Average Convergence/Divergence. It was originally developed by Gerald Appel in the 1960's. As the name suggests, it is based upon the principal of the moving average. The MACD is calculated by simply the taking difference between two exponential moving averages of different periods. Most stock and share analysts seem to prefer to compare a 26 day exponential moving average (EMA) with a 12 day EMA.
Calculation of the MACDSimply deducting the longer (for example the 26 day) Exponential Moving Average from the shorter (eg 12 day) EMA gives you the MACD value. This value oscillates around a zero point, zero being where the 26 day EMA is identical, and therefore (usually) crosses over the 12 day EMA.
Once the MACD has been calculated, a 9 day Exponential moving average of the MACD value is then calculated. This value is then plotted and is known as the signal line.
MACD interpretationInvestors and analysts who use the MACD make the following recommendations:
|Moving Average||MFI - Money Flow Index||Exponential Moving Average|
|RSI - Relative Strength Index||Moving Average Envelopes||ROC - Rate of Change|
|Fast and Slow Stoch Stochastics||W%R - Williams' %R||MACD|
|Standard Deviation Definition and Usage||Calculation of Standard Deviation||Normal Distribution and Standard Deviation|
Plus more useful stock market and share information:
|Online stockbrokers||Stock analysis software and online services|
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