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General Information 1. Stochastic Oscillator 2. On Balance Volume (OBV) 3. Japanese Candlesticks 4. Relative Strength Index (RSI) 5. Bollinger 6. Standard Deviation 7. Linear Regression Channel 8. Parabolic SAR 9. Moving Average Convergence/Divergence (MACD) 10. Williams %R 11. Momentum 12. ZigZag 13. Moving Average 14. High Low Open Close (HLOC) 15.ADX 16.Fibonacci 17.Draw Tool

MACD (Moving average Convergence/Divergence)

Definition: The MACD is a trend following momentum indicator that shows the relationship between two moving averages of prices. The MACD is the difference between a 26-day and a 12-day exponential moving average (MACD is shown in red). A 9-day exponential moving average called the SIGNAL (or trigger) is plotted on the same axis in order to indicate Buy / Sell opportunities (This line is shown in black).

Why use the MACD chart

- Foresee Buy and Sell signals - Use as an Oversold or Overbought Indicator - Indication of trends - Foresee price breakouts

Analysis Tools for MACD

The results are plotted around a Zero line (see chart below), If the MACD is greater than zero, then the market is bullish (The 12-day average is greater than the 26 day-average). If the MACD is less than zero, then the market is bearish. (The 26-day average is greater than the 12 day-average). When the MACD (red) crosses above it's Trigger line (black), a buy signal is indicated. When the MACD (red) crosses below it's Trigger line (black), a sell signal is indicated.

Detailed Analysis Methods and preferences   ^

The MACD is a trend following indicator, this implicates that you will be indicated of a buy or sell opportunity once a given trend has started. This means that you may miss the exact buy or sell opportunity, but the MACD will certainly keep you on the good side of trading. Please note that the MACD is not so reliable on shorter trends. The MACD proves most effective in wide-swinging trading markets. There are three popular ways to use the MACD ; 1.Crossovers : The MACD trading rule is to sell when it falls below its trigger line and a buy signal when the MACD crosses over to the top of the Trigger line. Not forgetting the fact that when the MACD is situated above the Zero line it is a buy signal and a sell signal when it is below the Zero line. 2.Overbought / Oversold Conditions: The MACD is also useful as an overbought / Oversold indicator. When the shorter moving average pulls away dramatically from the longer moving average (i.e. the MACD rises), it is likely that the security price is overextending and will soon return to more realistic levels 3.Divergences : End to current trends. An indication that an end to the current trend may be near occurs when the MACD diverges from the security. A bearish divergence occurs when the MACD is making new lows while price fails to reach new lows. A bullish divergence occurs when the MACD is making new highs while prices fail to reach new highs. Both of these divergences are more significant when they occur at relatively overbought / oversold levels. The above chart demonstrates a 3 and 6 period moving average with a 9 for the Trigger. These settings demonstrate short term buy and sell signals offering opportunities to get in or out. Notice that where the MACD goes above or below the Zero line, it indicates the trend of the security. For longer term trading you must set the preferences to 13 and 26 for the MACD and 9 for the Trigger.

Comments made by Analysts   ^

- Some technicians recommend buying using the 8-day / 17-day MACD with the 9-day Trigger line and selling using the 12-day / 26-day MACD with the 9-day Trigger line. - MACD is especially valuable when used in conjunction with a momentum indicator such as the Stochastic Oscillator or the RSI. Since the MACD is a sensitive indicator of public sentiment, it can be applied to Mutual Funds as well as Stock. - When using the MACD as an Overbought / Oversold indicator, a trader should look particularly at when the MACD pulls away from the Trigger in a dramatic manner, it is likely that the security price is overextending and will soon correct. - Buy when the MACD crosses from below to above the slower moving trigger. Sell when the MACD crosses from above to below the Trigger.

Tips & Tricks   ^

Look at ways to verify what you are seeing. For example : if the MACD indicates a buy signal while moving averages show a downward movement, do you really want to buy ? Like for all other analysis instruments you should always couple your study with other indicators like the Bollinger and the Will.%R tools as well as the Stochastic Oscillator or the RSI.

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