by Hodler Ash 
The MACD (Moving Average Convergence Divergence) is a technical indicator used in finance and trading to signal a potential buy or sell opportunity. It is calculated by subtracting a 26-day exponential moving average (EMA) from a 12-day EMA. The difference between these two moving averages is plotted as a line, known as the MACD line. A signal line, which is a 9-day EMA of the MACD line, is also plotted on the chart. When the MACD line crosses above the signal line, it is seen as a bullish signal, indicating that the stock may be oversold and a buying opportunity may be present. Conversely, when the MACD line crosses below the signal line, it is seen as a bearish signal, indicating that the stock may be overbought and a selling opportunity may be present.
MACD indicator formula
The MACD indicator is calculated using the following formula:
MACD Line = 12-day EMA – 26-day EMA
Signal Line = 9-day EMA of MACD Line
Histogram = MACD Line – Signal Line
The 12-day and 26-day EMAs are calculated by multiplying the weighting factor to the current period’s closing price and adding it to the previous period’s EMA multiplied by the weighting factor minus one.
For example, if the current period’s closing price is x and the previous period’s EMA is y, the 12-day EMA for the current period would be calculated as:
12-day EMA(current period) = (x * (2 / (12 + 1))) + (y * (1 – (2 / (12 + 1)))
The signal line is then calculated as 9-day EMA of the MACD line.
Histogram is plotted as the difference between MACD line and Signal line, Histogram = MACD Line – Signal Line
MACD indicator how to use ?
The MACD indicator is typically used in conjunction with other technical analysis tools, such as trend lines and cand charts, to confirm buy and sell signals. Here are some common ways to use the MACD indicator:
- Crossover: When the MACD line crosses above the signal line, it is considered a bullish signal, indicating that the stock may be oversold and a buying opportunity may be present. Conversely, when the MACD line crosses below the signal line, it is considered a bearish signal, indicating that the stock may be overbought and a selling opportunity may be present.
- Divergence: When the MACD line and the price of a stock move in opposite directions, it is considered a divergence. A bullish divergence occurs when the stock price is making new lows but the MACD line is not, which can signal a potential reversal. A bearish divergence occurs when the stock price is making new highs but the MACD line is not, which can signal a potential reversal.
- Overbought and Oversold: The MACD line can also be used to identify overbought and oversold conditions. When the MACD line is above 0, it is considered overbought and when it is below 0, it is considered oversold.
- Histogram: The histogram is plotted as the difference between the MACD line and the signal line. When the histogram is above zero, it indicates a bullish market, when the histogram is below zero, it indicates a bearish market.
It’s important to note that the MACD indicator should be used in conjunction with other technical analysis tools, and should not be relied on solely to make trading decisions. It’s also important to understand that the indicator can be affected by market volatility and should be used with caution.
MACD settings 8 21 5
The MACD settings of 8, 21, 5 refer to the parameters used to calculate the indicator. The first two numbers, 8 and 21, refer to the number of periods used to calculate the short-term and long-term moving averages. In this case, an 8-day exponential moving average (EMA) is subtracted from a 21-day EMA to generate the MACD line.
The third number, 5, refers to the number of periods used to calculate the signal line. In this case, a 5-day EMA of the MACD line is used as the signal line.
The settings of 8, 21, 5 are not considered as a standard setting for MACD, the standard setting is 12,26,9 .
It’s important to note that different settings will produce different results, so it’s important to test different settings to find the one that works best for your particular trading strategy and market conditions. It’s also important to remember that the MACD indicator should be used in conjunction with other technical analysis tools, and should not be relied on solely to make trading decisions.
Best macd settings for 5 minutes chart
The best MACD settings for a 5-minute chart will depend on the specific market or security being traded, as well as the individual trader’s preferences and strategy. However, some traders may find that using a shorter time frame for the moving averages, such as 5 and 12, may be more effective when using a 5-minute chart. This will allow the indicator to respond more quickly to short-term price movements.
Other traders may prefer to use a longer time frame for the moving averages, such as 12 and 26, to capture longer-term trends. A shorter time frame for the signal line, such as 2 or 3, may also be more effective for a 5-minute chart to quickly respond to the price movements.
It’s important to note that the best settings will vary based on the specific market or security being traded, as well as the individual trader’s preferences and strategy. It’s always a good idea to test different settings to find the one that works best for your particular trading strategy and market conditions.
It’s also important to remember that MACD is a lagging indicator, and traders should use it in conjunction with other technical indicators, such as trend lines, cand charts, and support and resistance levels, to make trading decisions.
Best MACD settings for scalping
Scalping is a short-term trading strategy that involves buying and selling securities quickly, often within minutes or even seconds. As such, the best MACD settings for scalping will depend on the specific market or security being traded, as well as the individual trader’s preferences and strategy.
Some traders may find that using a shorter time frame for the moving averages, such as 5 and 12, may be more effective when using a scalping strategy. This will allow the indicator to respond more quickly to short-term price movements. A shorter time frame for the signal line, such as 2 or 3, may also be more effective for scalping to quickly respond to the price movements.
Other traders may prefer to use a longer time frame for the moving averages, such as 12 and 26, to capture longer-term trends, although this may not be as ideal for scalping as it would not be as sensitive to the short-term price movements.
It’s important to note that the best settings will vary based on the specific market or security being traded, as well as the individual trader’s preferences and strategy. It’s always a good idea to test different settings to find the one that works best for your particular trading strategy and market conditions.
As always, it’s important to remember that MACD is just one of the many tools that can be used in technical analysis, and traders should use it in conjunction with other indicators, such as trend lines, cand charts, and support and resistance levels, to make trading decisions.
