How is the MACD line calculated?

The MACD (Moving Average Convergence Divergence) line is calculated by taking the difference between the 12-day exponential moving average (EMA) and the 26-day EMA of a security’s price. This calculation reflects the momentum of the price trend as it combines two different EMAs, with the shorter (12-day) EMA being more sensitive to price changes than the longer (26-day) EMA. When the 12-day EMA exceeds the 26-day EMA, the MACD line becomes positive, signaling that the market is in a bullish phase. Conversely, when the 12-day EMA falls below the 26-day EMA, the MACD line turns negative, indicating a bearish trend.

The other options do not describe the correct calculation for the MACD line. For instance, subtracting the longer EMA (26-day) from the shorter EMA (12-day) would yield an inverted result that does not accurately portray the relationship between the two averages. The 9-day EMA mentioned in one of the alternatives refers to the signal line typically derived from the MACD line itself, rather than being a part of the MACD line's initial calculation. Therefore, understanding the proper method to compute the MACD line is crucial for interpreting trading signals and momentum