Question: Complete where it say #TODO Q4: The MACD Indicator The Moving Average Convergence Diverge(MACD) Indicator is a trend-folowing momentum indicator that shows the relatanship between
Q4: The MACD Indicator The Moving Average Convergence Diverge(MACD) Indicator is a trend-folowing momentum indicator that shows the relatanship between two moing averagea ot a stocks pnce To calculate he MACD of a slock, we first have lo understand a new kind of meving average, called he Exponena soving Average (EMA) What we did in Qu ust on 3 known as an Simple Moving Average (SMA)-all points are given equal weght An EMA cn the other hand. plaus a greater weight, and herefore significance, on te most recent data points. The benefit cf the EMA over the SMA is tha: the EMA reacts faster to recent price changes. Le's take a look at how the ENA works. e can express the EMA using the following LCCDE: Where in] is the EMA at day , and xn is the stock price at day . Now, whry is this an 'exponential" movirg average? It might not be obvious when we state it in this form because it is a recursive LCCDE. Let's try to write It out step by step to try to unravel the recursion Assuming thaty is zero Vn
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