Moving Average Convergence/Divergence (MACD)

MACD Trading Strategy PDF

The MACD Stocks Indicator was developed by Gerald Appel.

The MACD Stocks Indicator is one of the simplest, most reliable, and most commonly used technical indicators available. The MACD is a momentum oscillator with some trend-following characteristics. MACD Technical Analysis in Stock - The most popular stock trading technical analysis of the MACD indicator first calculates the difference between two moving averages and draws this as the MACD "Fast " line: and A second MACD "Signal " (trigger) line - the signal line is calculated from the resulting MACD "Fast " line and drawn in the same frame as the "Fast " line. The "standard " MACD values for the MACD indicator "Fast " line are a 12-period exponential moving average and a 26-period exponential moving average and a 9-period exponential moving average for the MACD indicator "Signal " line.

MACD Trading Strategy PDF - Understanding MACD Technical Indicator

The MACD indicator is widely used as a trend following indicator & tends to work most effectively when measuring wide-swinging market stocks price movements. There are three basic techniques for using the MACD indicator to generate stocks signals.

MACD Stocks Trading Crossovers:

1. MACD Fast line and MACD Signal line Crossover: A buy signal occurs when the MACD Fast line crosses above the MACD Signal line and a sell signal occurs when MACD Fast line crosses below the MACD Signal line.

2. MACD Fast line / Zero Line Crossover: When the MACD Fast line crosses above zero line a buy signal is given. Alternatively, when the MACD Fast line crosses below zero line a sell stocks trade signal is given.

MACD Divergence: MACD Stocks Trading Divergence Strategy

Looking for stock trading divergence between the MACD technical indicator & stocks price can prove to be very effective in identifying potential stocks trend reversal signals and/or trend continuation signals when it comes to stocks price movement. There are several types of MACD divergence stocks setups:

MACD Classic Divergence (Regular Divergence)

• MACD Bullish Divergence - Lower lows in stocks price and higher lows in MACD indicator
• MACD Bearish Divergence - Higher highs in stocks price and lower highs in MACD technical indicator

MACD Hidden Divergence

• MACD Bullish Divergence - Lower lows in MACD and higher lows in stocks price
• MACD Bearish Divergence - Higher highs in MACD indicator & lower highs in stocks price

MACD Oversold/Overbought Levels: Stock Trading MACD Indicator Technical Analysis

The MACD indicator can be used to identify potential overbought and oversold levels in stocks price movements. These overbought and oversold levels are generated by comparing the distance between the shorter moving average & the longer moving average used to calculate the MACD: if the shorter moving average separates dramatically from the longer moving average it might be a signal that stocks price is over extending & it will soon return to more realistic levels.

Implementation of MACD settings

The stocks price period, and Moving Average type for each of the moving averages (including the MACD Signal line) have been parameterized to allow a trader full customization of the MACD indicator setting. The MACD Stocks Indicator Fast line is drawn as a solid blue line. The MACD Stocks Indicator Signal line is plotted as a solid red line. A green Histogram drawn on the MACD indicator represents the difference between the MACD Fast line and the MACD Signal line is also included to make identifying their MACD indicator crossover points easier.

MACD