MACD -Moving Average Convergence DivergenceMACD or "Moving Average Convergence Divergence" is a trend-following momentum indicator which shows the relationship between two moving averages of prices. It is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA , called the "signal line", is then shown on top and acts as a trigger for buy and sell signals. There are three common ways used by traders to interpret the MACD:1. Crossovers - when it falls below the signal line, it is a bearish signal, which indicates that it may be time to sell.When the "Moving Average Convergence Divergence" rises above the signal line, the indicator gives a bullish signal, which hints that the price is likely to experience an upward move. Some traders will wait for a confirmed cross above the signal line before entering into a position to avoid getting getting "faked out" or entering into a position too soon. 2. Divergence - When the price diverges,or moves in the opposite direction, from the "Moving Average Convergence Divergence". This signals the end of the current trend. 3. Dramatic rise - When it rises rapidly - that is, the shorter moving average pulls far away from the longer-term moving average - this signals that the security is overbought and should return to normal levels. Traders also watch for a move above or below the zero line because this indicates the position of the short-term average relative to the long-term average. When it is above zero, the short-term average is above the long-term average, which signals upward momentum. The opposite is true when the MACD is below zero. For more information on how to use this and other technical indicators be sure and sign up for
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