Stock market indicators macd

MACD (Moving Average Convergence/Divergence Oscillator) [ChartSchool]

On a trading chart, the moving average convergence-divergence indicator MACD was designed use exponential moving averages of 26 and 12 days, although the MACD is a model into which you can insert any moving average that suits your fancy and backtests well on your security.

A trigger usually a moving average of the indicator, superimposed on top of the indicator. In the MACD indicator window, the crossover of the trigger and the MACD indicator occurs earlier than the crossover of the two moving averages in the top window.

Looking from the left, the MACD tells you to buy two days earlier than the moving average crossover. The real benefit comes at the next signal — the exit.

But watch out for attributing too much to it. A shock can come along and cause the price to vary wildly from the trend, whereupon the tendency to converge or diverge becomes irrelevant. A new price configuration develops, and because the MACD is comprised of moving averages, the indicator still lags the price event like any other moving average.

Another way of displaying the MACD, in histogram format, is much easier on the eye. In this figure, each bar in the histogram represents the difference between the two moving averages on that date.

Incredible Charts: Two Great MACD Trading Signals

The two moving averages have the same numerical value — they have zero difference between them. While the bars grow taller: The difference between the two averages is increasing divergence , and this movement favors the trend continuing.

When the bars stop growing and start to shrink: The two moving averages are converging — watch out for a signal change. When the bars are upside down below zero , the signal is to sell.

What do you do when the bars become less negative? This indicator means selling pressure supply is running out of steam. Toggle navigation Search Submit. Learn Art Center Crafts Education Languages Photography Test Prep. How to Interpret the MACD on a Trading Chart.

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