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technical_indicators:moving_average_convergence_divergence_macd [2019/09/07 00:20] betseyp [MACD Bearish Signal Line Cross] |
technical_indicators:moving_average_convergence_divergence_macd [2023/07/11 21:01] jayanthi [Using with SharpCharts] |
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| ====== MACD (Moving Average Convergence/Divergence Oscillator) ====== | ====== MACD (Moving Average Convergence/Divergence Oscillator) ====== | ||
| - | ===== Introduction ===== | + | ===== What Is the Moving Average Convergence/Divergence Oscillator? ===== |
| Developed by Gerald Appel in the late seventies, the Moving Average Convergence/Divergence oscillator (MACD) is one of the simplest and most effective momentum indicators available. The MACD turns two trend-following indicators, [[:technical_indicators:moving_averages|moving averages]], into a momentum oscillator by subtracting the longer moving average from the shorter one. As a result, the MACD offers the best of both worlds: **trend following and momentum.** The MACD fluctuates above and below the zero line as the moving averages converge, cross and diverge. Traders can look for signal line crossovers, centerline crossovers and divergences to generate signals. Because the MACD is unbounded, it is not particularly useful for identifying overbought and oversold levels. | Developed by Gerald Appel in the late seventies, the Moving Average Convergence/Divergence oscillator (MACD) is one of the simplest and most effective momentum indicators available. The MACD turns two trend-following indicators, [[:technical_indicators:moving_averages|moving averages]], into a momentum oscillator by subtracting the longer moving average from the shorter one. As a result, the MACD offers the best of both worlds: **trend following and momentum.** The MACD fluctuates above and below the zero line as the moving averages converge, cross and diverge. Traders can look for signal line crossovers, centerline crossovers and divergences to generate signals. Because the MACD is unbounded, it is not particularly useful for identifying overbought and oversold levels. | ||
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| Finally, remember that the MACD line is calculated using the actual difference between two moving averages. This means MACD values are dependent on the price of the underlying security. The MACD values for a $20 stocks may range from -1.5 to 1.5, while the MACD values for a $100 may range from -10 to +10. It is not possible to compare MACD values for a group of securities with varying prices. If you want to compare momentum readings, you should use [[:technical_indicators:price_oscillators_ppo|the Percentage Price Oscillator (PPO)]], instead of the MACD. | Finally, remember that the MACD line is calculated using the actual difference between two moving averages. This means MACD values are dependent on the price of the underlying security. The MACD values for a $20 stocks may range from -1.5 to 1.5, while the MACD values for a $100 may range from -10 to +10. It is not possible to compare MACD values for a group of securities with varying prices. If you want to compare momentum readings, you should use [[:technical_indicators:price_oscillators_ppo|the Percentage Price Oscillator (PPO)]], instead of the MACD. | ||
| - | ===== Using with SharpCharts ===== | + | ===== Using MACD With SharpCharts ===== |
| The MACD can be set as an indicator above, below or behind a security's price plot. Placing the MACD "behind" the price plot makes it easy to compare momentum movements with price movements. Once the indicator is chosen from the drop-down menu, the default parameter setting appears: (12,26,9). These parameters can be adjusted to increase or decrease sensitivity. The MACD Histogram appears with the indicator or can be added as a separate indicator. Setting the signal line to 1 or leaving it blank, i.e. (12,26,1) or (12,26), will remove the MACD Histogram and the signal line. A separate signal line, without the histogram, can be added by choosing "Exp. Moving Avg" from the Advanced Options Overlays menu. | The MACD can be set as an indicator above, below or behind a security's price plot. Placing the MACD "behind" the price plot makes it easy to compare momentum movements with price movements. Once the indicator is chosen from the drop-down menu, the default parameter setting appears: (12,26,9). These parameters can be adjusted to increase or decrease sensitivity. The MACD Histogram appears with the indicator or can be added as a separate indicator. Setting the signal line to 1 or leaving it blank, i.e. (12,26,1) or (12,26), will remove the MACD Histogram and the signal line. A separate signal line, without the histogram, can be added by choosing "Exp. Moving Avg" from the Advanced Options Overlays menu. | ||