Skip to main content

What is the MACD & How Do You Use It?

 The Moving Average Convergence Divergence (MACD) is a technical indicator that shows the relationship between two moving averages of a stock’s price. It is calculated by subtracting a slow moving average period from a fast moving average period. There is also a Signal line which is a certain period’s EMA. Many traders use the MACD to tell direction and to determine when to buy. The green and red bars in the MACD help tell you which direction the stock is moving. Many traders buy when the MACD crosses above the signal line and sell when the MACD crosses below the signal line.


How to Read the MACD




        Above is an example of a MACD. It includes points where the MACD crosses above the Signal line and indicates a buy, as well as when the MACD crosses below the Signal line and indicates a sell. The MACD is a very powerful indicator that a multitude of traders use. Many investors are big advocates for the MACD because of its utility. Not only does it indicate buying and selling points, but it also clearly indicates the direction of the stock price with the green and red bars. 

How to Configure the MACD

    When setting up the MACD, you will first be asked for a Fast Moving Average Period, which is most commonly 12. Next, you will be asked for a Slow Moving Average Period, which is 8 most commonly 26. Then, you will be asked for a Signal Period, which is most commonly 9. Finally, you must set up all the colors and you are done. It is important to configure the MACD to your personal preferences and make sure it is appropriate for your strategy.

Popular posts from this blog

What is Catalyst Trading? - How to Trade Upcoming Events

 Catalyst Trading is when you play off of the hype in anticipation to an event that affects a stock's price. This is a very simple way to try to capture profits in, usually, a smaller time frame than most investments. There are many different types of catalysts that can cause a stock price to increase and there are many resources to use to find these catalysts. It is important to understand that just because there is a catalyst, it does not mean that the stock price will be affected by it. When researching into different catalysts, it is clear that some provide higher returns than others. Also, it is important to research into the stock that has the catalyst. An easy way to tell if it is worth investing is looking into that specific stock's previous catalysts. If that stock has previously reacted positively to catalysts, then it is reasonable to assume it will do so again.  With that being said, let's look into some different types of catalysts that are easy to track: Earni...
Read more

What are ETFs & How Do You Trade Them?

 An Exchange Traded Fund (ETF) is similar to a Mutual Fund in the fact that it is a group of stocks that you can buy through one ticker symbol. However, ETFs usually often contain stocks that all have something in common (Such as an index, market, etc.). They are popular for investors who want to trade both in the long-term and the short-term, depending on which ETF you choose to invest in. In this article, we will discuss different types of ETFs and how to trade some of them efficiently. Index ETFs     One of the most common ETFs that are used/recommended by many investors are Index ETFs. Index ETFs  are a group of stocks that are included in one popular index that you can invest in, basically allowing you to invest in an index. One of the most common Index ETFs is the S&P 500 ETF. Three of the most popular S&P 500 ETFs are: 1.)  SPDR S&P 500 ETF Trust (SPY) 2.)  Vanguard S&P 500 ETF (VOO) 3.)   iShares Core S&P 500 ETF (IVV)...
Read more

What are Bearish Candlestick Patterns & How Do You Read Them?

   Bearish Patterns  are universal patterns that candlesticks can follow that signify a downwards movement of share price. Identifying these patterns may help when trying to predict which direction a stock price will go. However, it is important to remember that even though a pattern begins to form, it does not always need to finish. There is no guarantee that a pattern will follow through to the end.  With that being said, here are some of the most popular Bearish Patterns: Bearish Engulfing     Above is an example of a Bearish Engulfing pattern. This pattern is identified by a red candlestick that completely encases a green candlestick. As you can see in the example above, the top of the red candlestick is above the top of the green candlestick, and the bottom of the red candlestick is below the bottom of the green candlestick. This is one of the shortest Bearish patterns but it is very important for quickly determining a stock's future direction. Bear ...
Read more