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MACD Technical Indicator Oscillator Analysis Fast Line and SignalLine

MACD is used in various ways to give technical analysis information.

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

Construction of MACD

The MACD indicator is created using two exponential moving averages (EMAs) and produces two lines. The default EMAs employed are 12 and 26, with a smoothing factor of 9 applied to the MACD line.

Summing up how MACD gets made

MACD uses 2 EMAs + a way to smooth things out (12, 26 Exponential MAs & 9 smoothing times)

The MACD only features two lines - the MACD fast line and the MACD signal line.

MACD Technical Indicator Oscillator Technical Analysis Fast Line and Signals Line

Analysis of MACD Lines - Trade Signals Generated by the MACD Fast Line and MACD Signal Lines.

  • The Fast Line is the difference between the 26 EMA & 12 EMA
  • The Signal-line is the 9 period MA of MACD fast line.

Implementation of MACD Indicator

MACD utilizes the MACD line in a continuous format, whereas the signal line is represented as a histogram. These two MACD LINES are then employed in concert to generate trade signals through the method of line crossover.

The MACD also has a center line, called the zero mark, which is where buyers and sellers in the market are evenly matched.

Readings above the center mark are viewed as bullish signals, while those below are considered bearish signals.

The MACD being an oscillator indicator, oscillates above & below this center line.

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