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Signal line

A moving average of an indicator plotted on top of it, so that crossings between the two generate mechanical buy and sell triggers.

MACD line, signal line and histogram under a price chartA price line above a lower panel holding two curves and a bar histogram measured from a zero line, with the point where the faster curve rises through the slower one circled.PRICEMACD (12, 26, 9)0signalMACDbullishcrossover
MACD, signal line and histogram. The MACD line is the gap between a fast and a slow moving average, and the signal line is a smoothed copy of it. The bars show the distance between the two, and the circle marks where the faster line rises through the slower one.

macd has a 9 period signal line, the stochastic-oscillator has %D, and most oscillators offer one. The purpose is to convert a continuously varying number into discrete events.

A signal line always adds lag, because it is an average of something that was already an average. A crossover therefore confirms that the indicator has already turned, and by the time it prints, price has usually moved.

The value is consistency rather than timing. A crossover rule is unambiguous and testable, which is worth something compared with judging by eye whether a line looks like it is rolling over. Just do not mistake the extra line for extra information.

Related: macd-signal-line, stochastic-oscillator, indicator-lag, macd, confirmation-signal

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