Forex technical analysis indicators: MACD (exponential smooth moving average)

The MACD indicator uses double (smooth) and slow (long-term) moving averages and the signs of their aggregation and separation to perform double smoothing operations. The MACD developed based on the moving average principle removes the defect of the moving average frequently sending false signals, and the second retains the effect of the moving average. Therefore, the MACD indicator has moving average trend, stability, stability, etc Features are technical analysis indicators used to study the timing of buying and selling foreign exchange and predict the rise and fall of foreign exchange prices.
From the MACD chart, you will usually see three numbers:
• The first number is used to calculate the moving average period;
• The second number is used in the slower moving average period;
• The third number is used to calculate the average between fast and slow.

For example, if you see that the MACD indicator parameters are “12, 26, 9” (the default setting for most charts), you can interpret it as follows:

• 12 represents the fast moving average on the 12th;
• 26 represents the slow moving average on the 26th;
• 9 represents the 9-day average between the two. This is the so-called vertical line histogram (the green line in the chart above).

When it comes to the MACD line, people generally have a misunderstanding. That is, these two lines are the price of the moving average. In fact, they are the difference between two moving averages.
MACD indicator calculation method
In the application of MACD, first calculate the fast moving average (ie EMA1) and the slow moving average (ie EMA2), and use these two values ​​to measure the dispersion between the two (fast and slow) lines The basis of the value (DIF), and then find the N cycle smooth moving average DEA (also called MACD, DEM) of DIF
Take the EMA1 parameter as the 12th, the EMA2 parameter as the 26th, and the DIF parameter as the 9th as an example to see the calculation process of MACD

1. Calculate the moving average (EMA)
2. The formula for the 12-day EMA is
EMA (12) = previous day EMA (12) × 11/13 + today’s closing price × 2/13

The formula for the 26th EMA is
EMA (26) = previous day EMA (26) × 25/27 + today’s closing price × 2/27 2.

Calculate the deviation value (DIF)
DIF = Today’s EMA (12)-Today’s EMA (26)

3. Calculate the 9-day EMA of DIF
Calculate the 9-day EMA based on the dispersion value, that is, the average dispersion, which is the calculated MACD value. In order not to be confused with the original name of the indicator, this value is also known as DEA or DEM.
Today’s DEA (MACD) = previous day’s DEA × 8/10 + today’s DIF × 2/10 The calculated values ​​of DIF and DEA are both positive or negative.

Okay, so now you know what MACD is. Then we will tell you what the MACD indicator can do for you.