What does MACD mean?

MACD stands for Moving Average Convergence Divergence, which is a popular technical analysis tool used by traders and investors in the financial markets. It is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. The result is a line that oscillates around a zero line, representing the convergence or divergence of the two moving averages. Additionally, a 9-period EMA called the signal line is plotted on top of the MACD line, which is used to generate buy and sell signals. Traders use the MACD to identify potential trend reversals, confirm the strength of a trend, and generate trading signals. When the MACD line crosses above the signal line, it is considered a bullish signal, indicating a potential buying opportunity. Conversely, when the MACD line crosses below the signal line, it is considered a bearish signal, indicating a potential selling opportunity. Overall, the MACD is a versatile and widely used tool in technical analysis, providing valuable insights into the momentum and direction of price movements in the financial markets.