The MACD Trading Indicator 1. Title slide 2. Hello everyone, this is Roger Scott from Market Geeks with another trading video tutorial for you today. Before I begin I want to remind you to subscribe to our video channel and donâ&#x20AC;&#x2122;t forget to visit Marketgeeks.com for your free trading report. 3. Today I'm going to introduce you to the MACD trading indicator. The MACD indicator is a trend momentum indicator that's basically a refinement of the two moving averages and measures the distance between the two moving average lines. MACD is an acronym for Moving Average Convergence Divergence. The indicator was developed by Gerald Appel and is discussed in his book, The Moving Average Convergence Divergence Trading Method. Needless to say over 30 years later, the MACD remains one of the most popular indicators in technical analysis. 4. Often timeâ&#x20AC;&#x2122;s beginners have difficulty understanding and utilizing the MACD because it looks rather complicated and intimidating at first. Once you take the MACD apart you will realize that it's a fairly basic indicator that is easy to understand once you familiarize yourself with it. The MACD turns two trend-following indicators, moving averages, into a momentum oscillator by subtracting the longer moving average from the shorter moving average. As a result, the MACD offers the best of both worlds: trend following and momentum. 5. The first thing you should learn is the basic components that make up the MACD. You need to become familiar with these components so that the MACD graph makes sense to you. Please pay attention to this example because it lays the foundation for next section. The MACD is made up of three basic components. This chart show you exactly where each of the three components are located so that you can start to see how the MACD is integrated together. The first line is the MACD line and it's formed by subtracting the 12 bar EMA (exponential moving average) indicator from the 26 bar EMA indicator. The second line you want to pay attention to is the Signal Line. This line is simply the 9 bar EMA of the MACD line. The purpose of this line is to smooth out the daily ups and downs of the MACD line. Finally, the last and the most visual part of the MACD is the Histogram. The Histogram is simply the difference between the MACD line and the Signal line. 6. The first thing to pay attention to is the MACD Line - This is the main component of the MACD and is calculated by subtracting the 16 period Exponential Moving Average (EMA) from the 26 period (EMA). You can see in this example how the MACD line fluctuates up and down just as soon as the Moving Averages move closer together and further apart from each other. What I want you to understand from this example is the basic components of the MACD and how they work together. I turned on the EMA indicator