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MACD Indicator Oscillator Trading Indicator Trading Indicator Technical Analysis Fast Line & Signal Line

MACD indicator is used in various ways to give analysis data.

  1. MACD center line crosses indicate bearish or bullish markets: below zero is bearish, above zero is bullish.
  2. MACD Cross-overs indicate a buy or sell signal.
  3. Oscillations can be used to indicate oversold and over-bought regions
  4. Used to look for divergence between price and indicator.

Construction of MACD Indicator

The MACD indicator is constructed using two exponential moving averages and this indicator plots two lines. The two default exponential moving averages used are 12 & 26. Then a smoothing factor of 9 is also applied when drawing the MACD.

Summary of how MACD indicator is drawn

MACD uses 2 EMAs + a smoothing factor (12, 26 Exponential MAs & 9 smoothing periods)

MACD indicator only plots two lines - the MACD fast line and the MACD signalline

MACD Lines - MACD Fast Line and MACD Signal Lines Signals - How to Trade with MACD Fast Line and MACD Signal Line

MACD Lines - MACD Fast-Line & MACD SignalLines Signals

  • The FastLine is the difference between the 26 EMA & 12 EMA
  • The Signal Line is the 9 period moving average of MACD fastline.

Implementation of MACD Indicator

MACD indicator implements the MACD line as a continuous line while the signal-line is implemented as a histogram. These 2 MACD LINES are then used to generate signals using the crossover strategy method.

There's also the MACD center line which also is referred to as the zero mark & it's a neutral point between buyers & sellers trading the market.

Values above the center-mark are considered bullish signals while those below are bearish signals.

MACD indicator being an oscillator technical indicator, oscillates above and below this center line.

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