by subtracting a 26-day moving average of a security's price from a
12-day moving average of its price. The result is an indicator that
oscillates above and below zero. When the is above zero, it means
the 12-day moving average is higher than the 26-day moving average.
This is as it shows that current expectations (i.e., the 12-day
moving average) are more than previous expectations (i.e., the
26-day average). This implies a , or upward, shift in the supply/demand
lines. When the falls below zero, it means that the 12-day moving average
is less than the 26-day moving average, implying a shift in the
A 9-day moving average of the (not of the security's price) is usually
plotted on top of the indicator. This line is referred to as the "signal"
line. The signal line anticipates the convergence of the two moving averages
(i.e., the movement of the toward the zero line).
Let's consider the rational behind this technique. The is the difference
between two moving averages of price. When the shorter-term moving average rises
above the longer-term moving average (i.e., the rises above zero), it means
that investor expectations are becoming more (i.e., there has been an
upward shift in the supply/demand lines). By plotting a 9-day moving average of
the , we can see the changing of expectations (i.e., the shifting of the
supply/demand lines) as they occur.
You can change long to short in the Input Settings
- For purpose educate only
- This script to change bars colors.