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Moving Average Convergence Divergence (MACD)

What is MACD?​

MACD is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. It's calculated by subtracting the longer-term moving average from the shorter-term moving average.

The MACD indicator consists of three components:

  • MACD Line - The difference between fast and slow EMAs
  • Signal Line - An EMA of the MACD Line
  • Histogram - The difference between MACD Line and Signal Line

Key Points:​

  • Helps identify trend direction, momentum, and potential reversal points
  • Works best in trending markets
  • Combines multiple moving averages into one indicator

How to Add a MACD Indicator?​

  1. Go to Indicators → "+" button
  2. Select Moving Average Convergence Divergence (MACD)
  3. Configure your settings as shown in the interface
  4. Click "Add" to add the indicator to your strategy

Configurable Parameters in MACD​

1. On Data​

  • Select which price data you want to apply the MACD to

2. Time Frame​

  • Defines the candle interval (5 = 5-minute candles as shown in the image)

3. Fast Length​

  • The period of the faster/shorter EMA (12 in the image)
  • Responds more quickly to recent price changes

4. Slow Length​

  • The period of the slower/longer EMA (26 in the image)
  • Creates a more smoothed line less sensitive to recent changes

5. Signal Length​

  • The number of periods (9 in the image) used to calculate the signal line
  • Acts as a trigger for buy/sell decisions

6. Source​

  • The price data used in calculations (typically close price)

7. Offset​

  • Shifts the indicator forward or backward (0 in the image) in time

Element Name​

  • The default label is _macd as shown in the image
  • You can rename this indicator for clarity, especially if using multiple MACD indicators

Use Cases for MACD​

  • Signal Line Crossovers
    → When MACD line crosses above signal line (potential buy signal)
    → When MACD line crosses below signal line (potential sell signal)

  • Zero Line Crossovers
    → When MACD crosses above zero (bullish momentum)
    → When MACD crosses below zero (bearish momentum)

  • Divergence Detection
    → When price makes new highs/lows but MACD doesn't confirm

  • Histogram Analysis
    → Increasing histogram values indicate strengthening momentum
    → Decreasing histogram values indicate weakening momentum

Next Steps​

✅ Experiment with different Fast & Slow Lengths to match your trading timeframe
✅ Combine MACD signals with other indicators for confirmation
✅ Look for divergences between price action and MACD lines
✅ Test using MACD histogram for early momentum shift signals