MACD Calculator

MACD Formula

The MACD (Moving Average Convergence Divergence) is calculated using the following formula:

                MACD = 12-Period EMA - 26-Period EMA
            

Understanding the MACD formula can help you interpret and analyze stock trends effectively.

What is MACD?

I believe MACD (Moving Average Convergence Divergence) is a concept that often puzzles many. Its numerical complexity can make it challenging to grasp. However, let me attempt to interpret MACD in simpler terms.

MACD essentially consists of two predictive components that give us insights into the future:

(1) The signal line, which acts as a conservative predictor, aims to smoothen out market noises and places emphasis on the current trend. It is derived from a 9-period EMA (Exponential Moving Average) series.

(2) The difference between the 12-period EMA and 26-period EMA represents a more trendy and aggressive predictor. It also filters out noises but places more focus on the present trend while neglecting past influences. This difference between the two EMAs means the resulting series is geared towards the present.

In simpler terms, the trendy predictor tries to anticipate what will be popular, while the conservative predictor cautiously catches up.

When the conservative predictor changes its direction in agreement with the trendy predictor, it can signal an opportunity for action. Think of it like listening to two stock pickers: one is aggressive and the other is more cautious. Once the more cautious picker decides to agree with the more aggressive one, it may be an indication to make a move. However, it's important to note that this doesn't mean both predictors are always correct.