What is MACD and how does it work?

MACD (moving average convergence/divergence) is an indicator developed by Gerald Appel in the late 1970s for technical analysis of stock prices. It highlights changes in the strength, direction, momentum, and duration of a stock price trend. The MACD indicator comprises three-time series (most often the closing price) that are calculated using historical price data. These three series are the MACD series itself, the "signal" or "average" series, and the difference between the two, the "divergence" series. The MACD is basically a difference between a "fast" (short period) and a "slow" (longer period) exponential moving average (EMA) of the price series. The average series is a moving average of the MACD series.

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