MACD Oscillator

MACD Oscillator

The Moving Average Convergence-Divergence (MACD) indicator is one of the simplest and most effective momentum indicators available. The MACD is a momentum oscillator calculated by subtracting the longer moving average from the shorter moving average. It offers the best of both worlds: trend following and momentum. The MACD fluctuates above and below the zero line as the moving averages converge, cross and diverge. Traders can look for signal line crossovers, centerline crossovers and divergences to generate signals.

Convergence occurs when the moving averages move towards each other. Divergence occurs when the moving averages move away from each other. A bullish crossover occurs when the MACD turns up and crosses above the signal line. A bearish crossover occurs when the MACD turns down and crosses below the signal line. Crossovers can last a few days or a few weeks, it all depends on the strength of the move.