MACD stands for the Moving Average Convergence Divergence. The MACD is a useful, objective tool which helps investors identify significant turning points in an individual security or in a major index, in
order to make intelligent investment decisions.
What is the MACD?
Invented in the 1970's by Gerald Appel, the MACD is a simple yet powerful technical indicator which can
provide significant information as to the current position of a security and its likely future direction. The MACD employs two historic exponential averages, plus a third "average of the percent
differences" called the Signal line.
There are conventional labels to the different historic moving averages based on the past period in time measured, e.g. 'Fast' denotes a moving average
accumulating most recent data, 'Medium' captures less current data and 'Slow' conventionally measures data furthest back in time.
MACD can be a worthwhile stand-alone trading system for any
stock, bond, mutual fund etc and can also be an excellent indicator for interpreting market trends. Whether you plot your data hourly or monthly, MACD can define different stages of market movement,
pinpoint overbought and oversold levels, and forecast likely outcomes to current trends.
How do I interpret MACD?
Buy/Sell signals:
The MACD
line is calculated by finding the percent difference between the two exponential averages (e.g. the "Fast" exponential moving average minus the "Slow" divided by the "Fast" moving average) and plotting these percent differences over past periods of time, for example, over a past 12 month period. An exponential average is then calculated of the MACD line, the
Signal line. Crossing of the Signal line over or under the MACD line, determines appropriate buy and sell signals.
How do I learn more about MACD? Where can I purchase it?
Signalert Corporation sells the MACD Video (complete with workbook supplement) for $195.00. The Video is an hour and a half long, and details the basic strategies of MACD – how and when to buy, sell and
more. Learn to differentiate the 'fast', 'slow' and 'medium' MACD lines, and more.
For more information on how to purchase the videotape, please click
