Moving Average Convergence Divergence (MACD)

MACD was developed by Gerald Appel and is discussed in his book, The Moving Average Convergence Divergence Trading Method. MACD combined the oscillator principles with a dual moving average crossover approach.

There are two lines in the MACD indicator. The faster line (MACD line) results from the difference between the 26 days EMA of the closing prices subtracted from the 12 days EMA of the closing prices. The slower line (signal line) is a moving average of the fast line. It is usually a 9 days EMA of the faster line.

Trading signals
Go Long : MACD line cross above Signal line
Go Short: MACD line cross below Signal line

Above shows MACD indicator for CDN (NYSE - Cadence). This indicator is primarily used to trade trends and should not be used in a ranging market. Using this indicator for a trending stock such as this, the following trades might have made by assuming that trading made at the open price on the following day when MACD generated a trading signal. Please note that the profit is calculated solely on the difference of the open position price and close position price excluded the commission and etc.

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