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MACD
Description
The Moving Average
Convergence/Divergence indicator (MACD) is
calculated by subtracting the value of a 0.075
(26-period) exponential moving average from a 0.15
(12-period) exponential moving average.
A 9-period dotted exponential moving
average (the "signal line") is
automatically displayed on top of the MACD
indicator line.
Interpretation
The
basic MACD trading rule is to sell when the MACD
falls below its 9-period signal line.
Similarly, a buy signal occurs when the
MACD rises above its signal line.
A
variation of the MACD can be created by plotting
the following formula:
macd()
- mov(macd(), 9, E)
Then
change the indicator line style to a histogram and
plot a 9-period dotted moving average of the
indicator.
In
a system test of this indicator, sell arrows are
drawn when the histogram peaked and turned down
and buy arrows are drawn when the histogram formed
a trough and turned up.
Tips
Additional
variations on the MACD (e.g., different moving
average time periods) can be created using the Price
Oscillator indicator. |
