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Over the years numerous technical indicators have
been developed to describe the stock performance, or, hopefully to predict future price
movements. In this section we introduce five of the most useful indicators, provide
examples, and explain how they are calculated.
MACD
Figure 8. MACD
MACD stands for Moving Average Convergence and Divergence. It is simply
the difference between a shorter period exponential moving average and a
longer period exponential moving average. For example,
MACD(8, 17) = EMA(8) - EMA(17)
The MACD is often plotted together with a "Signal Line," the 9-day
moving average of the MACD. A basic MACD signal is to buy when the
9-day signal line moves above the MACD line and to sell if it crosses
below the MACD line.
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