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26.05.2019

*AAKASHAYA PATRA SEVEN STAR SMART EDUCATION SERIES PART – 10 :*
MACD

MACD ( Moving Average Convergence and Divergence) On the basis of Moving Average, MACD is design and that is why it known as "Moving Average Convergence and Divergence

The Calculation of the MACD is as below :

There is a three main part of the MACD Indicator

1) MACD Line (12 Period EMA - 26 Period EMA )
2) Signal Line 9 Period EMA of MACD Line
3) MACD Histogram MACD Line - Signal Line
EMA = Exponential Moving Average

MACD Line : Calculation is a difference of 12 period EMA - 26 period EMA of the respective stock Here period means single candle of respective time frame

Signal Line : It calculate as a 9 period EMA of the MACD line

Histogram : Its a calculated as a difference of MACD line and Signal line and plot on Zero Line

Use of MACD in Chart :-

When we add this indicator in chart, it will be add as parallel to chart, contain three parameters
(1) MACD Line
(2) Signal Line and
(3) Histogram

When MACD line cross signal line from below to above side it will be consider as a Buy signal in respective time frame ( Bullish Crossover) When MACD line cross signal line from above to below side it will be consider as a Sell signal for that respective time frame ( Bearish Crossover)

Importance of Histogram :-

As we mentioned earlier, histogram is a difference of MACD line and Signal line and it piloted at Zero Line When this difference is positive, histogram is growing Up side of the Zero line and its a related to positive sign for the stock price may go Up ward side in near future And when the difference of the MACD line and Signal line will be negative, it will be growing below side of the Zero Line that will be negative signal for the stock price chart, price may fall down in near future due to histogram is showing negative

Use of MACD in Trend Identification :-

 MACD also help us to identify the trend of the stock When both MACD Line and Signal Line cross Zero Line from
below side to above side it means Up Trend may start soon and stock will trade positive side in near future Similarly when both MACD Line and Signal Line cross Zero Line from above to below side, it will be a negative sign for the stock chart and stock price may start down fall in near future.

for more such type of education joint our online series and batches and be a pro trader contact on 7028 421 786.

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