The MACD indicator is one of the most popular technical analysis tools. There are three main components of the MACD shown in the picture below:
- MACD: The 12-period exponential moving average (EMA) minus the 26-period EMA.
- MACD Signal Line: A 9-period EMA of the MACD.
- MACD Histogram: The MACD minus the MACD Signal Line.
The MACD indicator is an effective and versatile tool. There are three main ways to interpret the MACD technical analysis indicator, discussed in the next pages:
- Moving Average Crossovers
- MACD Histograms
- MACD Divergences