Moving Average Convergence/Divergence (MACD) is both the trend-following and momentum indicator. It is calculated by subtracting the longer (default setting = 26 periods) exponential moving average (EMA) from the shorter (default=12 periods) EMA. A third (default=9 periods) EMA, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals. The buy/sell trading signals are generated when the MACD crosses above/below the signal line. Also, a divergence between the price and the MACD can be used as an indication that the current trend is about to reverse.
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