How to use MACD in your Trading whether it’s Stocks, Options, Forex, Futures or CFD’s. If you don't quite know the best way to use MACD, then you need to visit A Traders Universe
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...
Macd Technical
1. MACD Technical | Divergence MACD
How to use MACD in your Trading whether it’s Stocks, Options, Forex, Futures or CFD’s.
If you don't quite know the best way to use MACD, then you need to visit A Traders
Universe
http://www.atradersuniverse.com/macd.html
MACD Technical | Divergence MACD
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MACD technical is a powerful tool that can sometimes be hard to understand
and use effectively. What if there was a way you could use the various
components of MACD technical to your advantage, rather than using just the one
method, that can see you whipsawed in and out of trades with monotonous
regularity. The more powerful uses of MACD are often overlooked by
inexperienced traders, but it's these other uses of MACD that can add a very
dynamic and powerful tool to your tool box.
Experienced traders will always use MACD in it's dynamic form, and will also use
it in conjunction with other tools such as trend lines, support and resistance,
volume and so on.
MACD stands for Moving Average Convergence Divergence and was developed
by Gerald Appel. MACD uses moving averages (default being 26 and 12) which
are lagging indicators, but these lagging indicators are turned into a momentum
oscillating indicator by subtracting the longer moving average from the the
shorter moving average.
The result is the blue line in the top chart below. The red line is the the 9 day,
exponential moving average of the blue line. (In the top window, the black line is
the 26 day MA and the white line is the 12 day MA) The red and green graphs
are actually what is called the histogram, and is a visual representation of the
distance between the blue and red lines. This can also be used quite effectively.
The theory being that when the blue line crosses the red line to the up side, it is
bullish. When the blue line crosses the red line to the downside it is bearish. But
there is a big problem with this theory on it's own as you can see from the bottom
chart. It is very common to find crossovers happening quite regularly in a
3. sideways market, and the buy and sell signals will see you whipsawed in and out
of the market with losses.
Unfortunately, this negative side of MACD will often scare traders off from using
MACD in a way that gets better results. The other dynamics to MACD are called
divergence, and utilizing the zero line in conjunction with support and resistance.
Divergence MACD is split into two parts, positive divergence and negative
divergence, and it is basically a visual representation of a weakening in price
coupled with increasing strength in MACD, or a weakening in MACD coupled
with increasing prices. There are two ways of spotting divergence and that is with
the MACD line itself and/or the histogram.
The other dynamic is to use the zero line, or what it sometimes called the
waterline, as a way of confirming a bullish or bearish move with some form of
support and resistance in price, and usually this follows a divergence signal.
If you’re interested in getting more free content and information, just access the
Macd Technical & Divergence Macd page.
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