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Moving Average Convergence Divergence (MACD)

by Survivor University

Published February 18, 2009 |

Moving Average Convergence Divergence or MACD measures the difference between two Exponential Moving Averages or EMAs.

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Moving Average Convergence Divergence (MACD)
Moving Average Convergence Divergence or MACD measures the difference between two Exponential Moving Averages or EMAs.

EMA's are a type of moving average where the most recent data is given more importance and thereby, are able to more accurate reflect recent movement in the market.

For example:
Positive = 12 day EMA > 26 day EMA
Negative = 12 day EMA < 26 day EMA

Keep in mind, moving averages are lagging indicators; they track what has already taken place and because MACD uses absolute differences rather than percentage changes. It doesn't provide a sensitive measure over long periods of time.

Book: The Advanced Moving Average Convergence-Divergence
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