Moving Average Convergence Divergence (MACD)
The Moving Average Convergence Divergence (MACD) is calculated by subtracting a longer period moving average from a shorter term moving average of the same security, producing an oscillator that oscillates above and below zero.
Positive MACD values are bullish, indicating that current expectations are pushing the price higher than previous expectations. Negative values are bearish, indicating that current expectations are pushing the price lower than previous expectations.
MACD is a lagging indicator. It does not predict future price changes; they just help you see what the trend has been so that you can trade with the trend and be on the right side of the market. Since it is a lagging indicator, the buy and sell signals it generates are late. If the trend is sustained for long periods, you can make large profits. Be careful because short trends or narrow trading ranges can result in losses due to whiplash as the price oscillates without a clear trend.
When you are analyzing potential option positions, it
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