The Moving Average Convergence/Divergence, or MACD, is a commonly used technical indicator in the world of finance. It represents the crossing of two moving averages and their oscillation above and below an equilibrium line. To calculate the MACD, we subtract a 0.075 (26-period) exponential moving average from a 0.15 (12-period) exponential moving average, with a 9-period dotted exponential moving average acting as the "signal line." This indicator is useful in identifying buying and selling opportunities when the MACD crosses above or below the signal line. Another variation of the MACD can be created by plotting a formula and using a histogram style. This indicator can be applied to stocks, stock indices, and commodities to determine overbought or oversold conditions in the market. By comparing the MACD line to the signal line, we can generate signals for potential trend reversals.
