Moving Average Convergence Divergence ( MACD ) Charts

The Moving Average Convergence Divergence charts, or MACD charts for short, is a technical indicator that is derived from the more simple moving average .

The MACD charts are oscillating indicators , meaning that they move above and below a centerline or zero . As with other oscillating and momentum indicators , a very high value indicates that the stock is overbought and will likely fall quickly . Conversely, a constant low value indicates that the stock is oversold and is likely to climb .

THE 12 DAYS AND 26 DAYS EMAS

The MACD charts are based on three exponential moving averages , or EMA . These averages can be of any period , although the most common combination , and one we will focus on, are the 12-26-9 MACD charts.

There are two parts to the MACD . We will first focus on the first part , which is based on the stock of the 12-day and 26 - day EMA . The 12 - day EMA is the faster EMA while the 26 - Day is slower.

The logic behind the use of a faster and slower EMA is that this can be used to measure momentum . When it faster (in this case 12 - Day ) EMA is above the slower 26 - Day EMA , the stock is in an uptrend , and vice versa . If the 12 - Day EMA is much faster than the 26 - Increase Day EMA , the uptrend is getting stronger and more pronounced . Conversely , when the 12 - day EMA starts to slow down , and the 26 - Day begins to near it, is the momentum of stock movement begins to fade , that the end of the uptrend .

LINE MACD

The MACD charts use these 2 EMA by the difference between them and the release of a new line . Very often , this new line is shown as a thick black line in the middle graph.

When the 12 - and Day 26 - Day EMA are the same value , the MACD line is at zero . When the 12 - Day EMA is above the 26 - Day EMA , the MACD line into positive territory . The further the 12 - day EMA of the 26 - day EMA , the MACD line is farther from the center or zero .

THE 9 DAYS EMA

This line on its own is not much more to tell. A moving average It is more useful when we consider the 9 - day EMA . This is the third value when we talk of 12-26-9 MACD charts. Note that the 9 - day EMA is an EMA of the MACD line , not the stock price. This EMA ( the thin blue line along the MACD line ) acts as a normal EMA and smoothes the MACD line .

The 9 - day EMA acts as a signal line or trigger line for the MACD . When the MACD line crosses above the 9 - Day EMA from below , it indicates that the downtrend is over and a new uptrend is formed . Time to consider. Bullish strategies Conversely, when the MACD line drops below its 9 - day EMA , a new downtrend forms and it is time to perform. Bearish strategies

THE MACD HISTOGRAM

Up to now, we relate to the simplest form of interpretation of the MACD charts. We now look at the MACD histogram . Like the MACD line is the difference between the 12 - and Day 26 - Day EMA , the MACD histogram is the difference between the MACD line and its 9 - day EMA .

So when the MACD line crosses above its 9 - Day EMA , the MACD histogram stabbing above zero . In other words , it is a bullish signal is obtained when the MACD histogram crosses above zero, and a bearish signal is obtained when these crosses zero .

Positive and negative DIVERGENCE

The MACD histogram forms valleys and peaks . Sometimes, a plurality of peaks are formed , with each successive peak is getting lower and lower. This increasingly lower peaks will constitute what is known as a negative divergence . A negative divergence on the MACD histogram is an indication that the change of the trend would return in the near future . This can happen even if the actual rate seems to make higher peaks in the graph. In short , the MACD histogram negative divergence is a warning that the stock would decline rapidly .

The positive divergence on the MACD histogram predicts the next uptrend . However , sometimes these differences can create false alarms. If we would have bought in a downtrend . These signals ,

As such, I would like to remind you that the individual indicators such as the Moving Average Convergence Divergence ( MACD ) should not be used on their own, but rather with one or two additional indicators of different types , secured with a view to possible signals graphs and prevent false alarms .

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