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Key Takeaways

Difficulty:Beginner
Reliability:High
Category:trend
Timeframes:1H, 4H, Daily

MACD (Moving Average Convergence Divergence)

trendšŸ“Š 1H, 4H, Daily

MACD shows the relationship between two EMAs. Consists of MACD line, signal line, and histogram.

Formula

Code
MACD Line = 12-period EMA - 26-period EMA
Signal Line = 9-period EMA of MACD Line
Histogram = MACD Line - Signal Line

Detailed Explanation

MACD (Moving Average Convergence Divergence) is one of the most popular and versatile technical indicators. It combines trend-following and momentum characteristics.

**Components:** 1. **MACD Line**: Difference between 12 and 26-period EMAs 2. **Signal Line**: 9-period EMA of MACD Line 3. **Histogram**: Visual representation of MACD - Signal difference

**Trading Signals:** - **Crossovers**: MACD crossing signal line - **Centerline Crossovers**: MACD crossing zero - **Divergences**: Price making new highs/lows while MACD doesn't

Parameters

Fast Period
Default: 12
Fast EMA period
Slow Period
Default: 26
Slow EMA period
Signal Period
Default: 9
Signal line EMA period

šŸ“ˆ Bullish Signals

MACD crosses above signal line, positive histogram growing, bullish divergence

šŸ“‰ Bearish Signals

MACD crosses below signal line, negative histogram growing, bearish divergence

Python Implementation

Complete MACD with crossover detection

Python
import pandas_ta as ta
macd = ta.macd(df['close'], fast=12, slow=26, signal=9)
df['MACD'] = macd['MACD_12_26_9']
df['MACD_Signal'] = macd['MACDs_12_26_9']
df['MACD_Hist'] = macd['MACDh_12_26_9']
# Detect crossovers
df['macd_bullish'] = (df['MACD'] > df['MACD_Signal']) & (df['MACD'].shift(1) <= df['MACD_Signal'].shift(1))

TradingView Pine Script

Try on TradingView
JavaScript
//@version=5
indicator("MACD")
[macd_line, signal_line, hist] = ta.macd(close, 12, 26, 9)
plot(macd_line, "MACD", color=color.blue)
plot(signal_line, "Signal", color=color.orange)
plot(hist, "Histogram", style=plot.style_histogram, color=hist >= 0 ? color.green : color.red)
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MT5 MQL5 Code

C++
int macd_handle = iMACD(_Symbol, _Period, 12, 26, 9, PRICE_CLOSE);
double macd_main[], macd_signal[];
CopyBuffer(macd_handle, 0, 0, 3, macd_main);
CopyBuffer(macd_handle, 1, 0, 3, macd_signal);

Python Libraries

pandas-ta
Technical analysis
pip install pandas-ta
TA-Lib
High-performance indicators
pip install TA-Lib

Common Mistakes

āœ—Trading every crossover without trend context
āœ—Ignoring divergences
āœ—Using default settings without optimization

Confirmation Signals

Zero line crossover
Histogram expansion
Price action confirmation

Best For

Trend confirmationMomentum measurementDivergence trading

šŸ’” Pro Tips

  • ā€¢Histogram shows momentum strength - larger bars = stronger momentum
  • ā€¢Divergence between price and MACD often precedes reversals
  • ā€¢Works best in trending markets, less effective in ranges
Last updated: December 29, 2024

Educational Disclaimer

This content is for educational purposes only and does not constitute financial or investment advice. Trading involves significant risk and you may lose your capital. Always consult a licensed financial advisor before making investment decisions.

Learn More

Investopedia - Technical IndicatorsBabyPips - Technical IndicatorsMetaTrader 5 Docs

Frequently Asked Questions

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Relative Strength Index (RSI)

RSI measures the speed and magnitude of price changes, oscillating between 0-100 to identify overbought and oversold conditions.

Stochastic Oscillator

Compares closing price to price range over a period. Consists of %K (fast) and %D (slow) lines.

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