Glossary
MACD (Moving Average Convergence Divergence)
The difference between the 12- and 26-period exponential moving averages, with a 9-period EMA of that difference as the signal line.
MACD (Moving Average Convergence Divergence), developed by Gerald Appel, is the 12-period exponential moving average (EMA) of price minus the 26-period EMA. The signal line is a 9-period EMA of MACD, and the histogram is MACD minus the signal line. The standard settings are 12, 26 and 9.
Example
On the hourly gold chart, the 12-period EMA is 4,012.0 and the 26-period EMA is 4,005.5. MACD = 4,012.0 − 4,005.5 = 6.5. With a signal line at 5.0, the histogram is 6.5 − 5.0 = 1.5. MACD crossing above its signal line is the usual buy signal.
Why it matters
MACD is built from moving averages, so it lags price. Its values are in price units, so 6.5 on gold cannot be compared with a reading on EUR/USD. In our lab, MACD rules on gold, in two settings and in combinations, did not survive costs.