MACD Definition

Definition of MACD

MACD (Moving Average Convergence-Divergence) is a technical analysis indicator measuring relative position and relative tendency of two exponential moving averages of price (usually closing price is taken as input). These two exponential moving averages differ only in one thing – the length of the period (i.e. how many days or bars back the particular moving average is looking).

MACD Line and Signal Line Definition

The distance between the two exponential moving averages is displayed as a line, called the MACD Line. Besides the MACD Line, a chart of MACD usually contains also the Signal Line, which is an exponential moving average of the MACD Line.

MACD Is Defined by 3 Parameters

Therefore, each MACD is defined by three parameters: the period lengths of the three exponential moving averages. Here you can see a more in-depth discussion about MACD Settings (e.g. which are popular, which are best, and how MACD is sensitive to different parameters).