The Moving Average Convergence/Divergence indicator (MACD) is a simple, yet reliable model, commonly used as an overbought/oversold indicator. The MACD model is based on 2 simple moving averages – a short MA of 12 days, and a long MA of 26 days. Other ways of calculating the MACD exist.

The 2 moving averages are calculated in the same manner as the Moving Average model. A BUY signal is indicated when the short MA has a larger value than the long MA elaborated upon above. A SELL signal is indicated when the short MA has a smaller value than the long MA.