Description:
The Moving Average Convergence Divergence (MACD) is a momentum oscillator widely used in technical analysis to evaluate the relationship between two moving averages of a security’s price. The MACD is designed to reveal changes in a trend’s strength, direction, and duration in a financial instrument’s price, providing valuable insights for traders and investors.
Input Parameters:
- Fast: A moving average that reacts quickly to recent price changes, commonly used for short-term trend analysis.
- Slow: A moving average that responds more slowly to price fluctuations, useful for identifying longer-term trends.
- Signal: The signal line is a 9-day EMA. As a moving average of the indicator, it trails the MACD and makes it easier to spot MACD turns.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Bullish/Bearish Crossovers: A bullish crossover occurs when the MACD line crosses above the signal line, which is often considered a buy signal. Conversely, a bearish crossover occurs when the MACD line crosses below the signal line, indicating a potential sell signal.
- Positive/Negative Divergences: A positive divergence transpires when the price makes a new low while the MACD forms a higher low, suggesting a potential reversal to the upside. Conversely, a negative divergence arises when the price records a new high while the MACD creates a lower high, indicating a possible reversal to the downside. Traders often use divergences as early warning signs of potential trend reversals.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.