| Trend Following Momentum Indicator | | | | If you're interested in using MACD technical analysis |
| Many investors will tell you that your potential for | | | | on your own charts, it's important that you learn the |
| success in the stock market is completely dependent | | | | three different methods commonly used for |
| on your grasp of market price movements and the | | | | interpreting the moving average convergence |
| way that you exploit your sense of timing to result in | | | | divergence. The first method is called the crossover, |
| the highest profits possible. This seems simple | | | | and it is a bearish signal that appears when the |
| enough, simply buy stocks at the lowest price | | | | MACD drops lower than the signal line. Investors |
| possible, and sell them at the highest price possible | | | | usually take this signal to mean that it may be time |
| before they head south again; however like many | | | | to sell to the highest bidder. With the convergence it |
| things, it is easier said than done. If you're interested | | | | can be easy to get "faked out" by the market, so |
| in perfecting your sense of timing, and learning how | | | | be sure to be patient and wait it out for a confirmed |
| to buy and sell stocks at just the right moment in | | | | cross above the signal line before seeking a seller's |
| the trend, it's important for you to become familiar | | | | position. |
| with something called MACD technical analysis. | | | | The second most common MACD technical analysis |
| MACD technical analysis stands for Moving Average | | | | method is called divergence, and it works opposite to |
| Convergence Divergence, and is a trend-following | | | | the way that the convergence works. You can spot |
| momentum indicator which is used to show how two | | | | the divergence by looking for the point where the |
| different flexible price averages relate to each other. | | | | security price breaks away from the MACD, signally |
| You can calculate the MACD by deducting the | | | | the fact that the current trend has come to an end. |
| twenty-six day exponential moving average (also | | | | The third and finally method is called the dramatic |
| known as the EMA) from the 12-day EMA. Then, a | | | | rise, and it can be spotted by waiting for the shorter |
| nine-day EMA of the MACD is plotted at the top of | | | | moving average to break away from the longer term |
| the MACD and called the "signal line." This line | | | | moving average. Investors usually interpret this as a |
| functions like a trigger indicator for investors' buying | | | | signal that the security has been overbought, |
| and selling signals. | | | | meaning that it will soon return to normal price levels. |