Moving Average Convergence Divergence (MACD)
As a follow up to my previous post on Bollinger Bands, I took a stab at MACD, which derives from similar calculations.
This is a somewhat squirrely subject and I might be opening myself up to attack or a can of worms in this attempted analysis. As a preemptive strike against such attacks, let me start off by saying that as a stock trader, I fall firmly in the "fundamentals" camp, and this type of technical analysis does little for me. Second, allow me to graciously further admit that my math could very well be wrong. Finally, grant me the chance to comment on the fact that we can find on the internet dozens and dozens of permutations on the mathematics of this MACD subject.
Three web links which I found quite helpful in understanding the math behind MACD are these:
The Wikipedia Page on MACD
The Wikipedia Page on Moving Averages and Exponential Moving Averages
which are required components of MACD analysis, and lastly,
A Stock Charts Dot Com web page which has a nice discussion on the subject.
Feedback on the mathematics is welcome.