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MACD: Market Strategy
Introduced by Gerald Appel, the convergence and divergence between moving
averages (MACD) indicator is a traditional, simple and reliable. MACD uses
moving averages within its formula, is an indicator of what the open areas are
overbought and oversold relative to its previous maximum and minimum.
History and concepts
Provides a sensitive measure of the intensity of market sentiment and provides
early clues to the continuation or reversal of the trend. According to Appel,
this indicator is particularly reliable in identifying entry points after a
sharp decline. The MACD indicator can be applied to the stock market as a whole
and also recently recommended, of course, for the currency market.
The dynamics of the formula derived by subtracting the longer moving average
from the shorter. Has a line bisector and the criteria are applied to interpret
the open with the specific indicators that we will detail.
Formula
MACD = EMA (26) - EMA (12) = "X"
Signal Ema 9 times on the MACD.
EMA = Exponential Moving Average
The formula used MACD "standard" is the difference of 26 meetings and EMA moving
averages of 12 meetings EMA.
Using shorter moving averages will produce a more rapid, more sensitive, while
using longer moving averages will produce a slower indicator, less prone to give
false signals. For our purposes at this seminar, the traditional 12/26 MACD will
be used for explanations.
Later applications of the indicator, try to use different moving averages in
calculating MACD.
The difference of two moving averages 26-12, one can construct a histogram (bars
perpendicular below zero (-) and above zero (+) - 12 sessions EMA is the faster
and the 26-session EMA is the slower.Generally, a 9 EMA MACD sessions called
Signal to complete the formula and is slower and the line is constructed as a
host of differences 12-26 EMA in each log off your computer.
Histogram mode:
The meaning of the histogram is to detect the difference between the two lines
12 and 26, when the histogram is above zero and then starts to decline we are
witnessing a weakening of the upward trend or loss of time, in the case when the
histogram is below the zero line and opens above it we have the beginnings of a
purchase and a bearish trend of the weakening or loss of acceleration. In
addition, when the histogram is above signal line and understand that it is a
sign of the beginning of the movement and when the bull enters histogram Signal
down the line, we are witnessing a beginning of change sobrevendido or Bearish.
Line mode
An upward signal occurs when the MACD line (the difference between 12 and 26) is
moved or its EMA crosses over the 9 sessions and if it happens to cross a low,
MACD moves below its 9-day EMA.
Mode compared
Use of EMA crosses 12 and 26 within the price chart or graph within the MACD and
serves as a signal or filters the data supplied by the MACD chart.
