The "best" MACD numbers depend on your trading style and the specific market you're analyzing, but the standard and most widely used MACD settings are 12, 26, and 9.
Understanding the Standard MACD Settings
The MACD (Moving Average Convergence Divergence) indicator is comprised of three key components, each represented by a number:
- 12 (Fast EMA): This represents the number of periods used to calculate the faster Exponential Moving Average (EMA). It reacts more quickly to recent price changes.
- 26 (Slow EMA): This signifies the number of periods used to calculate the slower EMA. It's less sensitive to short-term price fluctuations.
- 9 (Signal Line): This represents the number of periods used to calculate the EMA of the MACD line itself. It acts as a smoother average, providing buy and sell signals when the MACD line crosses it.
In essence, the MACD line is calculated by subtracting the 26-period EMA from the 12-period EMA. The signal line is then a 9-period EMA of the MACD line.
Why These Numbers?
These numbers (12, 26, and 9) were originally chosen because they approximate monthly cycles when used on daily charts. However, they have become widely adopted and thus often self-fulfilling.
Can You Use Different MACD Numbers?
Yes, you can, and many traders do. Experimenting with different settings can fine-tune the MACD to better suit specific assets or trading strategies.
Considerations for Customizing MACD Settings:
- Shorter Timeframes (e.g., 5, 13, 5): These settings will generate more signals, making the MACD more sensitive to price changes. This can be useful for day traders or those looking for quick entries and exits. However, be aware that they also produce more false signals.
- Longer Timeframes (e.g., 20, 50, 15): These settings will produce fewer signals and be less sensitive to noise. They are more suitable for swing traders or long-term investors who want to filter out short-term fluctuations.
How to Choose Different Settings:
- Define your trading style: Are you a day trader, swing trader, or long-term investor?
- Analyze the asset: Does the asset have high volatility or low volatility?
- Backtest: Test different settings on historical data to see what works best for the specific asset and timeframe.
Summary
While the standard MACD numbers of 12, 26, and 9 are a good starting point, the "best" numbers are ultimately subjective and depend on your individual trading goals and the characteristics of the instruments you are trading. Experimentation and backtesting are crucial for determining the optimal MACD settings for your particular strategy.
