MACD
Technical analysts often apply studies to the results of other studies, such as moving averages of spreads and RSI of RSI, to name a few. Technician Gerald Appel took a simple departure (oscillator) chart, which measures the distance between two moving averages, and overlaid a moving average of the result. This study was named Moving Average Convergence-Divergence (MACD), as it measures how two moving averages (the departure chart) move together and apart over time.
The underlying theory is that as a market moves higher, the shorter of two moving averages is above the longer average. This is because the shorter average reacts faster to price movements. The longer average will always lag behind. When the shorter average crosses below the ...
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