MACD Stock Trading Indicator Oscillator Stock Analysis FastLine & Signal-Line

MACD Stock indicator is used in various ways to give technical analysis information.

1. MACD center-line crosses indicate bullish or bearish markets: below zero is bearish, above zero is bullish.
2. MACD Crossovers indicate a buy or sell stock signal.
3. Oscillations can be used to indicate oversold & overbought regions
4. Used to look for divergence between stocks price and indicator.

Construction of MACD Technical Indicator

The MACD indicator is constructed using two exponential moving averages and this stock indicator plots two lines. The two default exponential moving averages used are 12 and 26. Then a smoothing factor of 9 is also applied when drawing the MACD indicator.

Summary of how MACD indicator is drawn

MACD uses 2 EMAs + a smoothing factor (12, 26 Exponential Moving Averages and 9 smoothing periods)

MACD indicator only plots two lines - the MACD fast line and the MACD signal line

MACD Lines - MACD Fast Line and MACD SignalLines Trading Signals

• The FastLine is the difference between the 26 Exponential Moving Average and 12 EMA
• The Signal-line is the 9 period moving average of the MACD fast line.

Implementation of MACD Technical Indicator

MACD indicator implements the MACD line as a continuous line while the signal line is implemented as a histogram. These two MACD LINES are then used to generate stocks signals using the crossover trading strategy method.

There is also the MACD center-line which is also referred to as zero mark & it's a neutral point between buyers and sellers trading the stock market.

Values above the center-mark are considered bullish stock trading signals while those below are bearish stock signals.

The MACD indicator being an oscillator indicator, oscillates above and below this center line.