Technical Indicator Convergence / Divergence Moving Averages
(Moving Average Convergence / Divergence - MACD)
MACD is an indicator of following the market trend. Usually it is referred to the category of oscillators in the shape of its histogram graphical display. In essence, MACD is a more graphic display of two moving averages. Experienced traders agree that the use of MACD in technical analysis at many more practical than the use of moving averages.
This technical indicator is calculated as the difference between 12 and 26-period exponential moving averages. In addition to the histogram values for the difference in the chart indicator, to better define the moment of entering the market, the chart also applied to the signal line. The signal line corresponds to the moving average devyatiperiodnomu on the values of MACD. It is best to use MACD in fluctuations in the market in a big hall.
MACD = EMA (CLOSE, 12)-EMA (CLOSE, 26)
SIGNAL = SMA (MACD, 9)
Where:
EMA - Exponential Moving Average
SMA - simple moving average
SIGNAL - the signal line of the indicator
The signals entering the market.
Intersections
Most often used the signal from the MACD histogram intersection is an indicator of its signal line. In this case, a sell signal is the time when the histogram is below the signal line, a signal to buy is the moment when the histogram crosses the signal line from the bottom up.
Also, the signal crossing is considered a transition zone of the histogram values in the positive zone of negative values (sell signal), and the transition from the negative zone in the zone of positive values (buy signal).
Overbought / oversold
Overbought / oversold market is determined by the difference between too much short-medium and long moving average. In the case of too much importance on the market MACD overbought and likely the price will go down to more realistic levels. When the MACD readings are too low have fallen below the zero axis, then the market is oversold.
Divergence
When between MACD and price diverges, it means the possibility of a quick end to the current trend. A bullish divergence occurs when MACD is making new highs while prices fail to reach them. A bearish divergence occurs when the MACD is making new highs while prices - no. Both of these divergences are most significant when they occur at relatively overbought / oversold levels.
