This resource for technical analysis of stocks and financial products has various uses related to timing trends in a market. Many individual traders, as well as institutional traders, investors and fund managers use the MACD to figure out more about where a stock price is likely to go in the immediate future. Most MACD interfaces are set up as two separate graph boxes. The upper box contains a candlestick chart for the security in question. This chart tracks the trading price of a security over time by representing each day as a “candlestick” that shows the day’s opening, closing, high, and low prices.
Below that is the MACD graph that shows several lines and the MACD histogram. Learn how each part of the interface is calculated. Each part of the MACD interface is the result of price calculations. Understanding MACD analysis requires understanding exactly how each part is calculated.
The EMA is like a regular moving average, except more weight is given to newer data. The signal line is the 9-day EMA of the MACD line itself. The MACD histogram is a series of bars that shows the difference between the MACD and the signal line. The signal line is so named because it serves as an indicator for timing trades. That is, when the signal line crosses the MACD, you should either buy or sell the security, depending on your position and the direction of the movement.