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MACD Oscillator Technical Analysis Fast Line & SignalLine

MACD is used in various ways to give analysis data.

  1. MACD center line crosses show bearish or bullish markets: below the 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 is constructed using 2 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 is drawn

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

MACD 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 SignalLine

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

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