MACD (Moving Average Convergence Divergence) Technical Analysis
The Basic Components: Fast and Slow Moving Averages
Moving average convergence/divergence (MACD) is a technical indicator that shows a convergence or divergence of two moving averages . In the figure 1, the top chart shows proce candles with moving average lines. The green line is slow EMA (exponential moving average) and the dark line is fast EMA. The fast ema uses 12 periods of the price bars/candles as its setting, while the slow EMA uses 26 periods.
MetaTrader Version MACD
The middle chart show MACD indicator plot which is similar with MACD indicator in MetaTrader client terminal application . The bar (histogram-like) is the MACD values, which is the difference between fast and slow EMA, computed as fast EMA – slow EMA. The dark line show the MACD signal, which is the smoothed version of the MACD, computed by processing the MACD with simple moving average (SMA). The averaging period setting for this averaging is 9 period. The combination of three averaging parameters (the fast EMA, slow EMA, and signal SMA) is then becomes the MACD parameter, referenced as MACD(12,26,9). Please note that the averaging method for MACD signal is different with non-MetaTrader MACD. The MetaTrader version uses simple method (SMA) while other version uses exponntial method (EMA) .
The difference of MACD and its signal line is plotted as bars in the bottom chart. This plot is added to ease the analysis of price acceleration, especially in the discussion of MACD-Signal crossover startegy since the MetaTrader version has no MACD-histogram plot like in other MACD version.
- MACD Standalone Trading Strategy
- MetaTrader Moving Average Convergence/Divergence
- Moving Average Convergence/Divergence (MACD)