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NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis

Which statement about the MACD indicator is correct?

MACD is the 12-period exponential moving average minus the 26-period exponential moving average, with a 9-period EMA of that difference serving as the signal line. It is unbounded and based on price, unlike RSI, which is limited to a 0 to 100 range.

  1. AMACD is the 12-period EMA minus the 26-period EMA, and the signal line is a 9-period EMA of the MACDCorrect
  2. BMACD is the 26-period SMA minus the 12-period SMA, and it is bounded between 0 and 100
  3. CMACD is the sum of the 12-period and 26-period EMAs, and the signal line is a 9-period SMA of price
  4. DMACD measures only traded volume against a 9-day average

Explanation

Standard MACD subtracts the 26-period EMA from the 12-period EMA, and the signal line is a 9-period EMA of that MACD line. It is unbounded, unlike RSI, so the bounded option is wrong. It is a price-based indicator, not a volume measure.

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