Posted by forex at 2:29 AM
Read our previous post
1. Chart any financial instrument. This can be a stock, bond, stock option or other instrument.
2. Apply two exponential moving averages (EMAs) to the chart. These are among the most common indicators provided by charting software, and even the most basic programs will offer this feature. Online charting services also provide EMA plots.
3. Change the setting for one of the EMAs to a period of '12.' This means it will look at the previous 12 prices when calculating the moving average line. Change the other EMA to '26.' When the settings are applied, you will see these two EMAs crisscrossing over your price chart.
4. Select any price bar to begin your MACD calculation.
5. Identify the exact level of the two EMAs for the price bar you have chosen. If you hover your mouse over the chart, many programs will automatically display these levels in the chart's header. If not, simply reference the price axis of the chart to see what price each EMA is at for the current bar.
6. Subtract the 26-period EMA level from the 12-period EMA level. If prices are rising over many of the preceding bars, this is likely to be a positive number. If prices are falling, this is likely to be a negative number. The number itself is the MACD.
7. Calculate this number for as many consecutive price bars as you desire. This will show how the MACD changes in value as prices move.
8. Average the nine previous MACD numbers together for any bar to create a 'signal' point for the bar's MACD. When calculated for many consecutive MACD numbers, this signal line is a moving average of the MACD itself and is often a part of the indicator. If the signal number is rising over time, then the MACD is rising overall as well, thus indicating a rise in momentum for the stock.