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10.21 MACD

The MACD (Moving Average Convergence/Divergence) indicator by Gerard Appel shows how two moving averages on closing prices come together or move apart (ie. converge or diverge). The main MACD line is the difference between a fast and slow EMA (see Exponential Moving Average), this is shown in green in Chart.

MACD = EMA[12] of price - EMA[26] of price

A signal or trigger line is then formed by smoothing this with a further EMA. This is shown in red in Chart.

signal = EMA[9] of MACD

A crossing of the MACD up through the signal line is taken as a buy signal, or downwards a sell signal. The difference between these lines is shown as a histogram (solid white block). This helps show whether the lines are coming together or going further apart.

histogram = MACD - signal

Crossings of the MACD line up or down through zero are also interpreted as bullish or bearish (respectively). This corresponds to crossings of the underlying EMA[12] up or down through the EMA[26].

Periods 12,26,9 are frequently used, but can be varied in Chart (see View Style).

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Chart is free software; you can redistribute it and/or modify it under the terms of the GNU General Public License as published by the Free Software Foundation; either version 3, or (at your option) any later version.