Which values has to be taken for the MACD Chart For Short Period, For Long Period and For Average Period?

Question

And I also want to know the reason for the same. Why ?

Answer 1

The only values I've seen used are (12,26,9) and (7,13,5). The first comes from the original book from Gerard Appel and is almost standard nowadays, the second one is about twice as fast.

Answer 2

The previous answer is correct about the period setting for MACD as (12, 26, 9) where MACD = 12 period EMA minus 26 period EMA and then we calculate 9 period EMA of MACD itself to get the signal line.

This standard period settings originated from the earlier days when the technical analysis used to be mainly based on the daily price changes i.e. day's open, close, high and low prices. A good explanation of the reasoning behind the period setting is at http://www.forexabode.com/technical-analysis/indicators/macd/. For ready reference, the 6 represents a trading week, 26 represents a month and and 9 for one and a half week. This situation has changed now as nowadays we have 5-working days' weeks with both Saturdays and Sundays as weekend. However, when MACD indicator was invented, a week used to have 6 working days. You may also check for the same at https://en.wikipedia.org/wiki/MACD.

A question may be asked as to why we do not change the settings according to 5-working day week. As explained in both the above resources, an indicator works because a lot of traders base their trading decisions on the signals generated by it. These decisions further fuel the price-action movement in that direction. Considering this fact, it is always better to use the standard settings which are commonly used by traders around the globe. Be it Forex or stocks or any other trading market.