Learning To Use MACD

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MACD

Moving Average Convergence Divergence is a momentum indicator that shows the relationship between two moving averages of prices.  At first this may seem over complicated, but let’s break it down.

1. The MACD is usually calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA, this would be your MACD line.
2. A 9-day EMA of the MACD Line is plotted with the indicator, it’s called the signal line. It is primarily used to see the trend.
3. The MACD-Histogram measures the difference between MACD and its 9-day EMA. The histogram is positive when MACD is above its signal line and negative when MACD is below its signal line.

There are 100’s of indicators on the market today, you can literally spend years learning their equations and mathematical calculations.  As you gain more expertise, you can add more of them to your arsenal, and weed out the ones that are over complicated without giving you any new information.  

For example, There are several momentum indicators, several oscillators, etc.  If you are using 1 momentum you don’t need to use other momentum indicators, this will tell you pretty much the same thing.  I want you to use this section as a building block of what you learned in fundamental analysis.  Eventually you would want to learn all facets of investing/trading system.