Moving Average Convergence Divergence (MACD)
In technical analysis, MACD stands for Moving Average Convergence Divergence. It is a widely used indicator that helps traders and analysts identify changes in momentum, trend strength, and potential trend reversals in a financial instrument’s price movement. The MACD indicator is composed of three main components: MACD Line (Moving Average Convergence Divergence Line): The MACD line is the difference between two exponential moving averages (EMAs) calculated over different time periods. The most common settings are the 12-period EMA minus the 26-period EMA. The resulting MACD line represents the short-term momentum of the price movement. Signal Line: The signal line is a smoothed moving average of the MACD line itself. It is typically a 9-period EMA of the MACD line. The signal line helps to identify potential changes in the direction of the trend. Histogram: The histogram is the vertical bars that represent the difference between the MACD line and the signal line. When the MACD line crosses above the signal line, the histogram bars are positive; when the MACD line crosses below the signal line, the bars are negative. The height of the histogram bars reflects the strength of the momentum.
Related Terms
- Volume
- Uptrend
- Support
- Risk-Reward Ratio
- Reversal
- Retracement
- Resistance
- Relative Strength Index (RSI)
- Price Action
- Position Sizing
- Overbought
- Oversold
- On Balance Volume (OBV)
- Trendline
- Mean Reversion
- Volume
- Uptrend
- Support
- Risk-Reward Ratio
- Reversal
- Retracement
- Resistance
- Relative Strength Index (RSI)
- Price Action
- Position Sizing
- Overbought
- Oversold
- On Balance Volume (OBV)
- Trendline
- Mean Reversion
- Moving Average (MA)
- Inverse Heads & Shoulders
- Heads & Shoulders
- Flag
- Drawdown
- Downtrend
- Double Top
- Double Bottom
- Distribution
- Descending Triangle
- Cup & Handle
- Consolidation
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- Breakout
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- Bollinger Bands
- Bearish Divergence
- Bullish Divergence
- Backtesting
- Ascending Triangle
- Accumulation
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Other Terms
- Automated teller machine
- Payroll deduction plan
- Operating expenses
- New fund offer
- Demand elasticity
- Interest rate risk
- Short Call
- Rho
- Put Option
- Premium
- Out of the money
- Option Chain
- Open Interest
- Long Put
- Long Call
- Intrinsic Value
- In the money
- Implied volatility
- Bull Put Spread
- Gamma
- Expiration date
- Exercise
- European Option
- Delta
- Covered Put
- Covered Call
- Call Option
- Bear Put Spread
- Bear Call Spread
- American Option
- Safe-Haven Currencies
- Lot
- Strangle
- Liquidity
- Pip
- Commodity Currencies
- Short Put
- Carry Trade
- Vega
- Underlying
- Time Value
- Time Decay
- Theta
- Currency Crosses
- Strike Price
- Straddle
- Deferred compensation
- Correlation coefficient
- Conflict theory
- Central limit theorem
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