Video Manual: Indicator MACD and How To Use It, Part #2

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

1. center line crosses indicate bullish or bearish markets; below zero is bearish, above zero is bullish.
   
2. MACD crossovers indicate a buy or sell signal.
   
3. MACD oscillations can be used to indicate oversold and overbought regions
   
4. Used to look for divergence between price and indicator.

MACD Construction

The MACD is constructed using two exponential moving averages and MACD 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

Implementation

• The MACD indicator implements the MACD line as a continuous line while the signal line is implemented as a histogram.
• The fast line and signal line is used to generate trading signals using the crossover method.
• There is also the center-line which is also known as the zero mark and it is a neutral point between buyers and sellers.
• Values above the center-mark are considered bullish while those below are bearish.
• The MACD being an oscillator indicator, oscillates above and below this center line.