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 are Volume & Float?

 Volume and float are two of the most important terms you must know when trading a stock. Volume is the specific amount of shares being traded in a given day or moment. Volume is very important because it allows you the liquidity to be able to buy and sell shares when needed. Without a high volume, buy/sell orders may be executed but temporarily not filled. This means that the order will not go through until there are shares ready to be traded.       Float is the total number of shares of a company that are available for people to trade. Float and volume are what allow for a stock to have volatility, or the 5 amount of movement a share price undergoes. If a stock has a low float but high volume then it will have high volatility, and if a stock has high float and low volume then it will have low volatility.       An example of high volatility could be as such: if a stock’s float is 50 million and its volume is 5 million then that is 10% of th...
Read more

Trading Different Time Frames - Day Trading vs. Swing Trading vs. Investing

 When starting to trade, it is required to decide which time frame you would like to trade. When you hear of people "investing in the stock market" (such as a retirement account), this is most likely long-term investing. However, many people are starting to utilize short-term trading, such as day trading and swing trading, as a source of income or even a hobby. In this article, we will explore how to decide which time frame is best for you and how to do so efficiently. Long-Term Investing     Long-Term Investing is the most common type of investing in the stock market and usually is any investment over 6 months. The main purpose for long-term investing is for growth and does not require much attention. This is because most investments in a long-term investor's portfolio are usually safe, blue chip stocks that have a very high chance of increasing over the long-run.     A common strategy for long-term investors is to buy after a market dip and reinvest the divide...
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