The moving average convergence-divergence (MACD) oscillator, developed by Gerald Appel, is built on exponentially smoothed moving averages. The MACD consists of two exponential moving averages that are plotted against the zero line. The zero line represents the times the values of the two moving averages are identical. In addition to the signals generated by the averages' intersection with the zero line and by divergence, additional signals occur as the shorter average line intersects the longer average line. The buying signal is displayed by an upward crossover, and the selling signal by a downward crossover.

The envelope model serves as a price filter. It consists of a short-term (perhaps 5-day) closing price based moving average to which a small percentage (2 percent is suggested for foreign currencies.) are added and substracted.

The two winding parallel lines above and below the moving average will create a band bordering most price fluctuations.

Basically, the moving averages such as the Simple Moving Average (SMA) and Linearly Weighted Moving Average(LWMA) are a set of numbers, each of which is the average of the corresponding subset of a larger set of data points. The averages are easy to understand and can be used “as is” by the beginners of forex.

The simple moving average (SMA) or arithmetic mean is the average of a predetermined number of prices over a number of days, divided by the number of entries. As opposed to that the linearly weighted moving average(LMWA) assigns more weight to the more recent closings. This is achieved by multiplying the last day's price by one, and each closer day by an increasing consecutive number.