What are the main differences between moving average convergence-divergence (MACD), and relative strength ?


On convergence-divergence indicator (MACD) and relative strength index (RSI) of the two indicators used by analysts and day traders. The main difference between is that each is designed to measure.

The MACD indicator is used to determine the movement of stock prices. It does this by measuring the divergence of two exponential moving averages (EMAS), typically the 12-period EMA and 26-period EMA. The MACD line is created by subtracting a 26-period EMA from the 12-period EMA and the line showing a nine-period calculations that are based on a basic understanding of the MACD as a histogram. The zero line provides a positive or negative value of the MACD indicator. Essentially, greater separation between the 12-period EMA and 26-period EMA shows an increase in the driving force of the market, up or down.

The indicator RSI aims to point out that the market is overbought or oversold relative to recent price levels. The RSI indicator calculates the average price gains and losses over a defined period of time; the period of time the default is 14 periods. RSI values are based on a scale from 0 to 100. Values over 70 are considered to be evidence of the market was overbought relative to recent price levels, and values below 30 are indicative of a market that is oversold. On a more General level, values above 50 is interpreted as bullish and a reading below 50 points is interpreted as “bearish.”

Because the two indicators measure different factors, they sometimes give conflicting stories. For example, the RSI may show a reading above 70 for a long period of time, indicating that the market was delayed by the parties in connection with the recent prices, while the MACD indicates the market is still growing in buying momentum. Or the indicator could signal an upcoming change in trend, showing a divergence with price (price still higher while the indicator turns lower, or Vice versa).

Although both are considered to be momentum indicators, the MACD measures the relationship between the two EMAS, while the RSI measures price change in response to recent price highs and lows. These two indicators are often used together to provide analysts a more complete technical picture of the market.

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