The MACD (Moving Average Convergence/Divergence) indicator uses two moving averages to show the relationship between the trend and momentum of a security's price. To calculate the MACD line, you subtract the 26-day exponential moving average (EMA) from the 12-day EMA. This produces a line that oscillates above and below the zero line, also known as the centerline. The MACD line is then used to confirm trends and generate buy and sell signals by following the momentum of the security's price.
Parameters
The following parameters can be adjusted based on the individual trader's preferences and risk tolerance:
Fast Length: The number of time periods used to calculate the short-term exponential moving average (EMA). This is typically set to 12 days, which is the platform’s default value.
Slow Length: The number of time periods used to calculate the long-term exponential moving average (EMA). This is typically set to 26 days, which is the platform's default value.
Note: A shorter fast length and longer slow length will result in a more sensitive MACD line that reacts quickly to price changes. A longer fast length and shorter slow length will result in a less sensitive MACD line that reacts slowly to price changes.
MACD Length: The number of time periods used to calculate the moving average of the MACD line, which is also known as the signal line. This parameter affects the sensitivity of the signal line and the speed at which it reacts to changes in the MACD line. A shorter MACD length will result in a more sensitive signal line that reacts quickly to changes in the MACD line, while a longer MACD length will result in a less sensitive signal line that reacts slowly to changes in the MACD line. This parameter is typically set to 9 days, which is the platform’s default value.
Average Type: Exponential, Hull, Simple, Smoothed, Weighted, Wilder’s
MACD Indicator on chart
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.