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MACD

Short for Moving Average Convergence/Divergence – a  technical indicator that is based on the spread between two moving averages.

The MACD indicator was developed by Gerald Appel and expands on the simple Moving Average.

The indicator is constructed by plotting two lines:

  1. Difference between a short(usually 12-day) and long(26-day) Exponential Moving Average
  2. The signal line which is usually a 9-day Exponential Moving Average of the MACD.

Three different methods of interpretations are used:

1) Crossovers
2) Bullish/Bearish Divergences
3) Overbought/Oversold Levels

 

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