3.12.1 MACD Centerline Crossover

Figure 3.50: MACD Centerline Crossover.

• Buy - MACD crosses over centerline

• Sell - MACD crosses below centerline

Parameters available:

• Short Period - the number of periods used for the period of the short-term moving average in the MACD calculation

• Long Period - the number of periods used for the period of the long-term moving average in the MACD calculation

• Signal Period - the number of periods used for the period of the signal line

• Rule type - please refer to 140 for details

• Data type - please refer to 141 for details

Setting Both EMA Periods
What does MACD crossing centerline or MACD=0 means? It means that the difference between both Moving Averages are zero or you can interpret it as crossing of moving averages. This will be the same as applying MA Dual Crossover rule. Hence, your choice of MA periods largely depends on your investment horizon. The typical settings for short term trading are 12-day and 26-day MA. In this case, when MACD crosses over centerline, we have EMA(12) crossing over EMA(26) which indicates a bullish signal. Re: Exponential Moving Average (EMA) is used for MA calculation in MACD.

Setting “Signal Period"
The setting for “Signal Period" is insignificant in this rule as we concern only on MACD line crossing the centerline.