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Moving Average Convergence/Divergence (MACD)

MACD Trading Strategy PDF

The MACD Indices Indicator was developed by Gerald Appel.


The MACD Indices Indicator is one of the simplest, most reliable, and most commonly used indices indicators available. The MACD is a momentum oscillator with some trend-following characteristics. MACD Technical Analysis in Indices Trading - The most popular indices 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 Indices Indicator

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


MACD Crossovers:

1. MACD Fast line and MACD Signal line Crossover: A buy indices signal occurs when the MACD Fast line crosses above the MACD Signal line and a sell indices signal occurs when the 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 indices signal is given. Alternatively, when the MACD Fast line crosses below zero line a sell indices signal is given.


MACD Divergence: MACD Divergence Indices Trading Strategy

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


MACD Classic Divergence (Regular Divergence)


  • MACD Bullish Divergence - Lower lows in stock indexes price and higher lows in the MACD indicator

  • MACD Bearish Divergence - Higher highs in stock indexes price and lower highs in the MACD indicator


MACD Hidden Divergence


  • MACD Bullish Divergence - Lower lows in MACD and higher lows in indices price

  • MACD Bearish Divergence - Higher highs in MACD indicator and lower highs in indices price


MACD Technical Analysis in Indices Trading


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


Implementation of MACD settings

The stock indexes price period, and MA type for each of the moving averages (including the MACD Signal line) have been parameterized to allow a indices trader full customization of the MACD indicator setting. The MACD Indices Indicator Fast line is drawn as a solid blue line. The MACD Indices 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 Technical Analysis in Indices Trading


MACD

 

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