The Moving Average Convergence Divergence (MACD) indicator is a popular technical analysis tool developed by Gerald Appel in the 1970s. It measures the difference between two exponential moving averages (EMAs) of prices, typically using a 12-period and 26-period EMA. A 9-period EMA of the MACD is also calculated and plotted as a signal line. Crossovers of the MACD line above or below the signal line indicate potential trend reversals. Traders also look for divergences between the MACD and price action for additional confirmation signals.

1. MACD
1
Rajakrishnan M
Assistant Professor in Commerce CA
Fundamental and
Technical Analysis

2. MOVING AVERAGE CONVERGENCE DIVERGENCE
Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India
2
The MACD
indicator is
one of the
most popular
technical
analysis tools.
There are
three main
components
of the MACD.
Gerald Appel
developed
the MACD in
the 1970s,
and it is one
of the most
popular
indicators in
use today.
Traders use
the MACD for
determining
trend
direction,
momentum
and potential
reversals.

3. MOVING AVERAGE CONVERGENCE DIVERGENCE
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MACD: The 12-
period
exponential
moving average
(EMA) minus the
26-period EMA.
MACD Signal
Line: A 9-period
EMA of the
MACD.
MACD
Histogram: The
MACD minus the
MACD Signal
Line.
Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

4. MOVING AVERAGE CONVERGENCE DIVERGENCE
4Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

5. SIGNAL LINE CROSSOVERS
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MACD triggers technical
signals when it crosses
above (to buy) or below
(to sell) its signal line.
MACD can be applied to
daily, weekly or monthly
price charts.
Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

6. SIGNAL LINE CROSSOVERS
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The MACD has a positive
value whenever the 12-
period EMA (blue) is above
the 26-period EMA (red)
and a negative value when
the 12-period EMA is
below the 26-period EMA.
Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

7. SIGNAL LINE CROSSOVERS
7Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

8. There were eight signal line crossovers in six months: four up and four
down. There were some good signals and some bad signals
8Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

9. MACD
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Divergence between the MACD and the
price action is a stronger signal when it
confirms the crossover signals.
Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

10. BULLISH DIVERGENCE
10Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

11. BEARISH DIVERGENCE
11Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

12. HISTOGRAM
12Dr. N.G.P. Arts and Science College
Coimbatore, Tamil Nadu, India

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