MACD Indicator

The MACD series is the difference between a "fast" (short period) exponential moving average (EMA), and a "slow" (longer period) EMA of the price series. The average series (signal) is an EMA of the MACD series itself.

The D in MACD, "divergence" refers to the two underlying moving averages drifting apart, while C for "convergence" refers to the two underlying moving averages coming towards each other.

The significance of events on the MACD is taken as indication that the trendline is about to accelerate in the direction of price movement. Such events include:

• the MACD line crossing the signal line (convergence); that is, when the divergence (the bar graph) changes sign.

• the MACD line and signal line both crossing the average line (zero axis).

The indication is put in the context of situations where the MACD line does not conform to the price movement, e.g. a price low is not accompanied by a low of the MACD.

The interpretation of such events and situations is to compare:

When"signal-line crossover" occurs - when the MACD and average lines cross. If the MACD line crosses down through the average line (a "bearish" crossover), or if it crosses up through the average line (a "bullish" crossover).

When "bearish convergence" or "bullish convergence" occurs - when the price makes a new low and the MACD confirms with a new low of its own; or when the price makes a new high and the MACD confirms with a new high of its own.