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Moving Average Convergence/Divergence

This indicator consists of two moving averages, which represent upper and lower boundaries of a security’s normal trading range. A sell signal is generated when the security reaches the upper band and a buy signal is generated at the lower band. When the market is more volatile the moving average boundaries diverge (widen) and when the markets are calmer the moving average boundaries converge (narrow). The distance between these boundaries is therefore an indication of how volatile the market is for the stock in question.