Moving Average Convergence Divergence (MACD)

The MACD indicator is made up of two main lines, the MACD line and the signal line.

• The MACD line is calculated by subtracting the 26-period EMA from the 12-period EMA.
  

• The signal line is calculated by taking the 9-period EMA of the MACD line. The resulting two lines oscillate around the zero line, which represents the equilibrium point between buyers and sellers.

When the MACD line crosses above the signal line, it is considered a bullish signal indicating a potential trend reversal to the upside. Traders may consider buying the security in this scenario. Conversely, when the MACD line crosses below the signal line, it is considered a bearish signal indicating a potential trend reversal to the downside. Traders may consider selling the security in this scenario.

Traders can also use the MACD to identify changes in momentum. When the MACD line is rising above the signal line, it suggests that momentum is shifting to the upside. When the MACD line is falling below the signal line, it suggests that momentum is shifting to the downside.