Moving Average Convergence Divergence (MACD) shows the difference of two moving averages - EMA12 and EMA26, and a 9-day EMA of the difference is plotted against it to trigger buy or sell signal.
There are three parameters in MACD:
- MACD line - the difference between the 12 and 26 period EMA
- Signal line - the 9 day EMA of the MACD line
- Histogram - a visual representation of the difference between the MACD line and the signal line
1. Detect overbought/oversold levels
2. Crossovers
3. Divergences