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MACD

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Introduction

The MACD or Moving Average Convergence and Divergence is a running indicator.

Construction

MACD (alpha, beta) = EMA (alpha) - EMA (beta)

MACD.SignalLine (gamma) = SMA (gamma)

Signals

  • Go long when MACD crosses MACD.SignalLine from below
  • Go short when MACD crosses MACD.SignalLine from above

Strength

  • Stronger when divergence occurs on the MACD line
  • Stronger when large swing above or below the zero line

Notes

  • Unless there is a divergence, do not go long if the signal is above the zero lone
  • Nor go short if the signal is below zero

Related Terms

SMA, EMA

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