How to Use the MACD Technical Indicator - Part 1
In this video, the speaker defines MACD and explains its features.
MACD stands for Moving Average Convergence Divergence. Charting packages used the 12,26,9 formula to plot the MACD - the MACD line is the difference between the 12 day and 26 day exponential moving average (EMA), then this is superimposed by the 9 day EMA which serves as a "signal line". Through the use of price charts that utilized the 12,26,9 formula, he showed how the MACD is plotted and how faster it is than most lagging technical indicators. He also explained how MACD provides a clearer picture of exponential moving averages and divergences.
Quotes from the video:
- MACD is what's known as a centered oscillator, in other words the MACD fluctuates above and below a centering line which typically known as the zero line.
- These types of oscillators are good for identifying strength or weakness or direction of momentum behind a securities move.
- When the oscillators are above the zero line we are in a bullish mode and below the zero line we are in a bearish mode.