What is MACD?
Let us look at how it works. When a MACD rolls to the bottom on a chart it is in a bearish trend. When the MACD on a chart rolls over to the top then it is a bullish trend. When we use this as a trading signal for the stock below, we enter the stock when the MACD rolls over to the top. The stock is at $13.50. We exit the trade when the MACD rolls over to the bottom. The stock is at $16.50.
In our example we made $3 or 23% in 3 months. You may want to look into this as a possible trading technique. Or at least it will help you read the stock. An aggressive trader may decide to enter a stock before the MACD pulls over. A more conservative trader may want to wait until the MACD crosses the line and combine it with other oscillators. Calculations The calculations behind his oscillator looks like this. MACD =(12-day EMA - 26-day EMA) Of course the indicator automatically calculates this and graphs the changes at the bottom of the chart below the stock so you can see the trend. Other Oscillators There are a lot of other oscillators out there which people use to decide how a stock will move. Here is a short list. Haurlan Index - Named after Peter Haurlan Rate of Change - Looks at the change in price to determine the trend ADX Indicator - A trend following indicator |
