MACD stands for Moving Average Convergence / Divergence. This indicator is developed in 1979 by Gerald Appeal, and is one of the most popular technical indicators.MACD is appreciated by traders the world over for its simplicity and flexibility because it can be used either as a trend or momentum indicator.
MACD is the difference of a 12 and a 26 exponential moving average(EMA).Of the two moving averages that make up MACD, the 12-day EMA, is obviously the faster one, while the 26-day is slower. In the calculation of their values, both moving averages use the closing prices of whatever period is measured. MACD subtracts the 26-period from the 12-period and the result will be displayed in a single line which is the MACD main line. Typical MACD indicators, have one extra line, which is a simple moving average of the main line. This exponential moving average is set to 9 by default and it acts as a trigger for buy and sell decisions. MACD generates a bullish signal when it moves above its own nine-day EMA, and it sends a sell sign when it moves below its nine-day EMA.
CHART 1
In MetaTrader, the default MACD doesn’t have the main MACD line(see the top indicator of chart 1). Instead, it has bars (histogram) representing the main line and a trigger line (the red line). It uses a 9 simple moving average(SMA) instead of EMA for the trigger line. This will not substantiially effect the effectiveness of MACD.
The standard MACD used by most current technicians has the two lines i.e. the main line (blue) and trigger line(dotted red line) with an addition of a historgram of the differece between the main line and the trigger line(MACD-H). (refer to the middle indicator of chart 1) .
Another version of MACD set the trigger line as 0 instead of 9. It has only a histogram of the difference between a 12 and a 26 EMA. In Meta Trader it is refer as Moving Average of Ossicilator(OsMA).(see the bottom indicator of chart 1).
I prefer to use the Standard MACD of the middle indicator of chart 1with coloured histogram.(see chart 2).
CHART 2
