A clean Python implementation of the MACD technical indicator, used by traders to identify market momentum and potential buy/sell signals.
The MACD is a trend-following momentum indicator that shows the relationship between two exponential moving averages (EMAs) of a security's price. It consists of three parts:
- MACD Line: (12-period EMA - 26-period EMA)
- Signal Line: 9-period EMA of the MACD Line
- Histogram: MACD Line - Signal Line
-
- The MACD Line: This is the core of the indicator. It is calculated by subtracting the 26-period Exponential Moving Moving Average (EMA) from the 12-period EMA Example: MACD Line = 12-Period EMA - 26-Period EMA
-
- The Signal Line: This is a 9-period EMA of the MACD Line itself. It acts as a trigger for buy and sell signals. Example: Signal Line = 9-Period EMA of the MACD Line
-
- The Histogram: This represents the difference between the MACD Line and the Signal Line. It shows the momentum behind a move Example: Histogram = MACD Line - Signal Line
Buy Signal: When the MACD Line crosses above the Signal Line.
Sell Signal: When the MACD Line crosses below the Signal Line.
The Histogram helps visualize the strength of the trend. A growing histogram means the trend is getting stronger.
This code is for educational purposes only. Always do your own research before making any investment decisions.