Moving Average Convergence Divergence (MACD) Momentum Indicator
- by Manny Backus
- Published on 6/26/08
- Article views: 514
The MACD is a great trending indicator that can be used for many daytrading strategies. A bullish market is indicated by the faster-moving average crossing the slower-moving average on the way up. A bearish market is indicated by the faster-moving average crossing the slower-moving average on the way down. On top of that, the MACD has different periods for the fast- and slow-moving averages. The typical default MACD periods are 8, 17, 9 or 12, 26, 9.
The MACD is based on three moving averages, however, they essentially show up as being only two lines. The 8 - period and the 17 - period moving averages are combined to form the faster-moving average line. The 9 - period exponential moving average forms the slower-moving average. In your daytrading strategy, the MACD moving average lines can be read for three pieces of information to give you the buy and sell signals you need for successful trades.
The first type of buy and sell signal you get from the MACD is called a breakout. This breakout is signified by the faster-moving average crossing the slower-moving average. If you were to examine a MACD chart, you would see a few places where this is happening. Like we talked about earlier, when the faster-moving average line crosses the slower-moving average line on the way up, you've got a bullish signal. Conversely, when the faster-moving average line crosses the slower-moving average line on the way down, you've got a bearish signal. That's a breakout. There are some traders who will enter or exit a trade based when the line crosses, however, keep in mind that by doing so, you could limit potential profits and take on additional losses.
The second type of buy and sell signal we can get from the MACD is to test for support and resistance. When you're day trading stocks, you might be told to trade on the cross, but here is something you can add to your strategy instead of just blindly trading at the cross. What you can do is check to see if the indicator lines are moving in the same direction and test the indicator line as being a support or resistance line after the cross.
The last type of buy and sell signal we can get from the MACD is divergence information. When the fast- and the slow-moving average lines move away from each other, the mound on the chart expands. As these lines draw near to each other, the mound shrinks. That is called divergence. Divergence is an important day trading tip that can strengthen your position on a trade if read correctly.
Using the MACD is a good way for experienced day traders to get an idea of when to buy and sell based on averages that give you a logical reason to buy or sell at a particular time.
Manny Backus is an expert at helping day traders make hundreds or thousands
of dollars within just the first hour of the trading day. Visit Day Trading
Pro for more information.
More Articles
-
-
-
» Latest articles
-
» Highest rated articles
- Investments in Private Equity: A boon for investors
In real estate, private equity remains impartial. When the deal goes in hands of privatization it becomes more specific in spite when it was under the government. It is not necessary that every time this thing happens but with observational studies it has been retrieved that privatization has provided the equity to the real estate investments.
- Moving Average Convergence Divergence (MACD) Momentum Indicator
If you're serious about developing your day trading online career, you'll want to learn about the various tools and indicators you have available to you, such as the Moving Average Convergence Divergence (MACD). The MACD is a momentum indicator that is based on moving averages.
- Make Money with Scientific Theories of Currency Trading
If you really want to learn currency trading the right way you need to be aware that 95% of traders lose - not because they because they don't try, its just they get the wrong Forex education and this results in a swift wipeout.
- An Introduction to Forex Inflation Indicators
Forex Inflation indicators are frequently used when trying to forecast a direction of a currency in any Forex day trading. These indicators are an extremely essential part of basic analysis and of using monetary indicators in general. Inflation normally has a considerable effect on different economical factors, comprising on the interest rates, on unemployment, as well as on the online Forex currency price.
- Tips for Investing In Real Estate with No Money Down
There are numerous methods of investing in real estate with no money down. Many investors use few of the strategy for getting a real estate no money down deal in the course of their career.
- Best Forex Trading Tips
Trade in pairs not in currency- Like any relationship; you need to know both the sides. Success or failure in forex currency trading relies upon being right about both foreign currencies and how they contact each other, not just one. Understand the basics - When you start to trading currency online, it is indispensable that you understand the basics of this particular market if you desire to make the most of your investments
- Mutual Fund Expenses
An informed investor knows where his money is going. For an investor in mutual funds, it is essential to understand the expenses of mutual funds. These expenses directly influence the returns and cannot be neglected.
- Introduction and Overview of Forex Trading
Forex involves the trading of currencies. It is the largest financial market in the world and has an estimated daily turnover of 1.9 trillion dollars. This turnover is larger than all the worlds stock market on any given day.
- Common equity sharing arrangement
The common equity sharing arrangement involves one party income in the property and the other putting up cash and/or financing. Both the inhabitant and the non-occupant take pleasure in tax benefits and share the profit, as described later in this chapter. First time home buyers make the best occupant partners while family members, sellers and real estate investors plug the non-resident partner role.
- Tips for Investing In Real Estate with No Money Down
There are numerous methods of investing in real estate with no money down. Many investors use few of the strategy for getting a real estate no money down deal in the course of their career.
- How to Straighten Out Your Tax Affairs in 2010
Utter the word 'taxes' in front of people and you are sure hear a loud groan. Frankly, there are valid reasons behind this response: First of all, paying your taxes annually can be a financial burden, especially with the economic hard times which we are going through these days.
- Benefits of Yoga - Redefining Life, Meditation and Exercise
Yoga is a complete exercise for the mind, body and soul and it can give a person a change to know himself in a new light. Regular practice of Yoga has been known to reduce stress, increase concentration and also benefit one's overall health.
- The Best Floral Perfumes
Floral perfumes are considered the best perfumes all over the world. In fact the history of perfumes says that floral perfumes are the first perfume category of the world and thus popular also. Floral perfumes represent the essence of love and romance.
- Coffee Gift Baskets
Even a Coffee Bean or San Francisco Coffee outlet frequenter will not be able to master the art of appreciating true gourmet coffee unless they know the history and information about gourmet coffee.
- Rent a car in Israel
If you are already in Israel and wish to rent a car, then you can make a booking and tell the service to pick you up from wherever you are. The best part about car rental in Israel is that they are extremely flexible.
- A History of Vintage Automobiles - From 1916 to 1924
Before cars were around, people usually traveled distances using horse-drawn carriages. But as early as 1335 several bright minds have been trying to come up with a 'horseless carriage'.
- Ecommerce Checkout - Make Them Register
The world of ecommerce is expanding daily as more and more retailers take their business to the web in the hopes of attracting a percentage of those ever finicky web shoppers. As the amount of businesses open up ecommerce shops online, the amount of web development companies is also growing, offering ecommerce solutions for even the smallest of budgets. It is important that web developers understand the dynamics of the checkout process when discussing the options with the client.
- 3 Rules to Follow in Your Logo Design
When designing your own logo or getting it done by logo design professionals, ensure the following three basic rules and you will have a great and memorable corporate identity.
- Common mistakes before starting a website
If you want your website to be a big hit then you need to avoid some common mistakes before starting one. Here you have a list of pitfalls that are designed for beginner and for many established ones too. Check out the common mistakes that have to be avoided for sure!
- Top 10 SEO secrets
Today everyone wants to have better search engine result pages ranks. However only one can have the rank 1. Therefore you need to optimize constantly your websites and to have an edge over others you need to do something different and unique. Following are 10 rare tips/secrets which can help you get high search engine ranks.
