The moving average convergence divergence is another in the class of indicators that builds on top of moving averages of prices. We'll refer to it as MACD. This goes a step further than the APO. Let's look at it in greater detail.

The moving average convergence divergence was created by Gerald Appel. It is similar in spirit to an absolute price oscillator in that it establishes the difference between a fast exponential moving average and a slow exponential moving average. However, in the case of MACD, we apply a smoothing exponential moving average to the MACD value itself in order to get the final signal output from the MACD indicator. Optionally, you may also look at the difference between MACD values and the EMA of the MACD values (signal) and visualize it as a histogram. A properly configured MACD signal can successfully capture the direction, magnitude, and duration of a trending instrument price: