Moving Average Convergence Divergence (MACD)

A trend-following momentum indicator that shows the relationship between two moving averages.

Usage

Use to identify trend direction and momentum. Crossovers of the MACD line and signal line provide entry and exit signals, while the histogram shows the strength of the trend.

Background

Gerald Appel developed the MACD in the late 1970s. It is calculated by subtracting the 26-period EMA from the 12-period EMA. A nine-day EMA of the MACD, called the ‘signal line,’ is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals. — Investopedia

Parameters

• fastperiod (default: 12): Fast EMA period
• slowperiod (default: 26): Slow EMA period
• signalperiod (default: 9): Signal EMA period

Formula

[ MACD = EMA(12) - EMA(26) \ Signal = EMA(MACD, 9) ]

Source