MACD Strategy¶

Overview¶

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages.

How It Works¶

MACD consists of three components: - MACD Line: 12-period EMA - 26-period EMA - Signal Line: 9-period EMA of MACD Line - Histogram: MACD Line - Signal Line

Trading Signals¶

Buy Signal (Bullish Crossover)¶

MACD line crosses above the signal line.

SQA::Strategy::MACD.trade(vector)  # => :buy

Sell Signal (Bearish Crossover)¶

MACD line crosses below the signal line.

SQA::Strategy::MACD.trade(vector)  # => :sell

Usage Example¶

stock = SQA::Stock.new(ticker: 'AAPL')
prices = stock.df["adj_close_price"].to_a

# Calculate MACD
macd_line, signal_line, histogram = SQAI.macd(
  prices,
  fast_period: 12,
  slow_period: 26,
  signal_period: 9
)

vector = OpenStruct.new(
  macd: [macd_line, signal_line, histogram]
)

signal = SQA::Strategy::MACD.trade(vector)

Parameters¶

Parameter	Default	Description
Fast Period	12	Fast EMA period
Slow Period	26	Slow EMA period
Signal Period	9	Signal line EMA period

Characteristics¶

Attribute	Value
Complexity	Medium
Best Market	Trending
Win Rate	45-55%
Time Horizon	Medium to long term

Strengths¶

✅ Excellent trend following
✅ Combines trend and momentum
✅ Clear crossover signals
✅ Can detect trend changes early

Weaknesses¶

❌ Lags in fast markets
❌ Whipsaws in ranging markets
❌ False signals during consolidation

Tips¶

Confirm with Trend: Best in established trends
Histogram Divergence: Watch for divergence with price
Zero Line Cross: Additional confirmation signal
Multiple Timeframes: Align daily and weekly signals

EMA - Uses moving average crossovers
SMA - Similar crossover approach
RSI - Complementary momentum indicator