What is MACD?
The MACD indicator is a collection of three time series calculated from historical price data, most often the closing price. These three series are:
- the MACD series proper, which is the difference between a "fast" (short period) exponential moving average (EMA), and a "slow" (longer period) EMA of the price series,
- the "signal" or "average" series, which is an EMA of the MACD series itself, and
- the "divergence" series which is the difference between the two.
Why 12, 26, 9?
How to interprete MACD?
- Signal-line Crossover
- Zero Crossover
MACD False Signal?
A prudent strategy may be to apply a filter to signal line crossovers to ensure that they have held up. An example of a price filter would be to buy if the MACD line breaks above the signal line and then remains above it for three days. As with any filtering strategy, this reduces the probability of false signals but increases the frequency of missed profit. Analysts use a variety of approaches to filter out false signals and confirm true ones.