What is Moving Average Convergence Divergence? Forex Profitable System

Moving Average Convergence/Divergence:

      Moving Average Convergence Divergence is one of the widely used dynamic indicators and it indicates the connection among two price moving averages. The value of MACD is the difference between a 26 period and 12 periods EMA.

Ways to use MACD:

There are three main ways to use MACD.

• Crossover: When the MACD indicator rises above the signal line, it is buy entry that the same MACD indicator falls below the signal line, it is sell entry.
• Overbought/Oversold Conditions: MACD is helpful as an overbought/oversold indicator.
• Divergence: A Bullish divergence making a new high and bearish divergence making a new low.

MACD Calculation:

          MACD = EMA(CLOSE, 12)-EMA(CLOSE, 26)
          SIGNAL = SMA(MACD, 9)

EMA – Exponential Moving Average
SMA – Simple Moving Average
Signal – Indicator Signal Line