# Ask Colin

There is absolutely no standard colour coding used for MACD in charting software or in publications. Further, when a coloured chart is photocopied or reproduced in black and white, there will often be two lines that are drawn identically except for their shape.

The key to understanding which line is which on a chart where there is no key to the colours lies in understanding how the MACD is calculated. Once you understand this, you will never have trouble knowing which is which again.

The MACD line is the difference between a 26-period exponential moving average and a 12-period exponential moving average.

The Signal line is simply a 9-period exponential moving average of the MACD line.

Now, when we calculate a moving average of a line, the effect is always to smooth out the fluctuations in the line. So, the Signal line will always be a smoother line than the MACD line. In other words, the signal line will not be as volatile. Another way to look at this is that the MACD line will move faster and swing more widely than the Signal line. So, there are two easy ways to determine which is the MACD line:

At important peaks in the indicator, the MACD line will be at the top and turn down across the signal line. Likewise, at important troughs, the MACD line will be at the bottom and turn up across the Signal line. These are the key signals given by the indicator.

If the indicator is rising strongly, the MACD line will be above the Signal line. Likewise, if the indicator is falling strongly, the MACD line will be below the Signal line.

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