Developed in 1979 by Gerald Appel, the MACD (Moving Average Convergence Divergence) is a type of oscillator and a trend following technical analysis tool used to detect asset momentums.
MACD = EMA12 – EMA26
The EMA is the moving average giving more weight to the most recent prices. 12 and 26 are the periods.
The mean value of MACD is 0 and has no limits. A high value indicates a falling trend, a low value indicates a rising trend.
This indicator consists of two lines, the MACD line and the signal line, as well as a histogram indicating the difference between these two. It is adapted for short term investments and must be coupled with other indicators like the RSI.
Rising signal: the MACD line crosses the signal line from the bottom.
Falling signal: the MACD line crosses the signal line from the top.
Bullish trend: the MACD line is above 0.
Bearish trend: the MACD line is under 0.