MACD Indicator Oscillator Stock Indices Technical Analysis Fast Line and Signal Line
MACD Stock Indices indicator is used in various ways to give technical analysis information.
- MACD center line crosses indicate bullish or bearish markets; below zero is bearish, above zero is bullish.
- MACD Crossovers indicate a buy or sell Stock Indices trading signal.
- Oscillations can be used to indicate oversold and overbought regions
- Used to look for divergence between price and indicator.
Construction of MACD Indicator
The MACD Stock Indices indicator is constructed using two exponential moving averages and this Stock Indices technical indicator plots two lines. The two default exponential moving averages used are 12 and 26. Then a smoothing factor of 9 is also applied when drawing the MACD Stock Indices indicator.
Summary of how MACD Stock Indices indicator is drawn
MACD uses 2 EMAs + a smoothing factor (12, 26 Exponential Moving Averages and 9 smoothing periods)
MACD Stock Indices technical indicator only plots two lines - the MACD fast line and the MACD signal line
MACD Lines - MACD Fast Line and MACD Signal Lines Stock Indices Trading Signals
- The Fast Line is the difference between the 26 EMA and 12 EMA
- The Signal line is the 9 period moving average of the MACD fast line.
Implementation of MACD Indicator
MACD Stock Indices indicator implements the MACD line as a continuous line while the signal line is implemented as a histogram. These two MACD LINES are then used to generate trading signals using the crossover trading strategy method.
There is also the MACD center-line which is also known as the zero mark and it is a neutral point between buyers and sellers trading the Stock Indices market.
Values above the center-mark are considered bullish Stock Indices trading signals while those below are bearish Stock Indices trading signals.
The MACD Stock Indices indicator being an oscillator indicator, oscillates above and below this center line.