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MACD:-Moving Average Convergence & Divergence

It is a momentum technical indicator developed by Gerald Appel in 1960’s. It indicates the difference
between long term (26) and short term (12) Exponential Moving Averages. It is calculated as follows:

MACD=EMA {12} of price- EMA {26} of price.

Trigger line: - The trigger line or Signal line if derived from smoothing with an EMA, function as a trigger
for buy and sell signals

Signal=EMA [9] of MACD

The difference between MACD and signal line is shown as solid histogram style.

Histogram=MACD-signal

Interpretation

The three types of trading signals are generated:-

MACD line

 Crossing the signal line

When the MACD line crosses the signal line from lower levels it’s an indication for
buying and vice versa.

 Crossing the “0” median line

When the MACD line cross above the 0 line is interpreted as bullish and cross below the
0 as bearish.

 Divergence between MACD line and Price

Positive divergence: - It arises when prices make a new selloff, but the MACD will
remain on the higher side (Remains on the point where it fell) signaling bullish trend.

Negative Divergence: - When prices make new high MACD doesn’t rise as high as
before signaling bearish trend is still continuing.
Negative Divergence-bearish trend has been shown in the GUR ncdex daily chart

Positive Divergence-bullish trend has been shown in the copper mcx daily chart

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