The tool of choice of many analysts, which at the same time has a brilliant performance, which is evidenced by the widespread use of suckers among capital market participants.
Moving Average Convergence Divergence was designed by Gerald Apple, an American physicist and researcher in the late 1970s. McDee is in the family of oscillators and in recent years has been one of the most widely used indicators among analysts.
As the name implies, the moving average is used in the calculations of this indicator, so unlike some oscillators, it does not have a complex calculation formula.
What components does Mackdi include?
This indicator includes two moving averages called “suction line” and “signal line”, which are given more weight in the calculation of the suction average at prices closer to the last trading days. The suction line has a fast and oscillating feature, but the signal line is very slow and low turbulence, which is the reason for the difference between the average of the suction line and the signal line.
The third component is the suction histogram, which shows the difference between the suction line and the signal line in the form of vertical lines.
Before we get into the details of Macdi, it is better to look at the pictures carefully. Considering that the Macdi indicator has two different appearances and is used by analysts with the names of classic Macdi and Macdi, we decided to introduce both indicators to you.
Keep in mind that the performance of both is the same and only differ in appearance that you can choose one of your choice and use it.
Familiarity with Macdi calculations
The McDean line, or McDeline, as a fluctuating and fast line, is always moving with the signal line, which sometimes intersects with each other, which in this case and in certain circumstances provide important signals to analysts.
On the other hand, the movements of the suction line, considering the following of the price chart, form pivots, which also issue other important signals in examining the coordination or inconsistency of the behavior of the price chart and the suction line.
Calculating the suction line is very simple and knowing how to calculate the suction line allows you to optimize the indicator based on the behavior of the chart you want to receive better signals. In calculating the suction line, we need two moving averages of EMA or exponential type:
• First, we calculate the average of 12 price periods.
• Then we calculate the exponential average of 26 periods.
• Demand represents an average of 12 periods out of an average of 26 periods on our sucker line.
MACD = [Price, 12 Period] EMA – [Price, 26 Period] EMA
But how is the signal line calculated? The calculations of this line are directly related to the suction line, in fact, the signal line is the average 9-day exponential line of the suction line.
Signal = [MACD, 9] EMA
The third component of the sucker is its histogram, which in the classical sucker indicator indicates the difference between the sucker line and the signal line. In fact, when the sucker line and the signal line are very different from each other, the histogram will be large, and when the two are close or equal, the histogram will be smaller or even become a line. In the new Macdi indicator, the histogram is the same Macdi line that was explained in the pictures above.
Macdi indicator signal
As mentioned, the sucker signal is output from the intersection of the sucker line and the signal line. A buy signal is issued when the suction line (blue line) crosses the signal line (red hazard) from the bottom to the bottom. Also, when the suction line (blue line) crosses the signal line (red danger) from the top to the top from zero, then the sell signal will be issued.
It should be noted that the intersection of the suction line and the signal line in the mentioned areas and with the above characteristics are considered as a signal and the absence of any of the above violates the suction signal.
Divergence and convergence in Macdi
As the name McDee suggests, one of its applications is to study divergence and convergence, which is important to analysts. If you are unfamiliar with the concept of divergence and convergence, we recommend that you read the convergence and divergence training carefully once.
One of the positive features of Macdi is that it provides the best possible divergence signal. If we compare the family of oscillators, we will find that McDee is very smart in detecting the weakness of the trend, and according to Gerald Apple, it is the best indicator to measure the strength of the trend.
Positive and negative characteristics of Macdi
Given that McDee is one of the most widely used indicators, it can be concluded that its consideration was probably not unreasonable.
In addition to simplicity, McDee has the ability to simultaneously examine the strength of the trend and the strength of the return, which has made its positive features popular among indicators. In addition to these positive features, Macdi, like other indicators, has a slight delay, which we explained in detail in the article on indicators.