The MACD is a popular technical analysis indicator that we believe every trader should be skilled at. The calculation behind the MACD is fairly simple. Essentially, it calculates the difference between a currency’s 26-day and 12-day exponential moving averages (EMA). The 12-day EMA is the faster one, while the 26-day is a slower moving average.
The calculation of both EMAs uses the closing prices of whatever period is measured. On the MACD chart, a nine-day EMA of MACD itself is plotted as well, and it acts as a signal for buy and sell decisions. The MACD generates a bullish signal when it moves above its own nine-day EMA, and it sends a sell sign when it moves below its nine-day EMA. Also, the MACD is powered with histogram which fills depending on the momentum the price takes. The MACD is considered to be one of the most efficient tools used in technical analysis. After reading this eBook you will learn how :
To interpret the MACD
To take advantage of signal and centerline crossovers
To use the MACD histogram
To use MACD for spotting price divergences