reading the MACD line

[ross1985]

Hi,

I’m trying to use the MACD line as one of my indicators. One of my indicators is whether the MACD line is angling up or down on the long-term chart in the direction of my trade. My problem is, I’m having trouble figuring out if I’m supposed to be looking at just one line of the MACD or both lines because they are often angling in different directions. On my live chart I have a blue line and an orange line (I believe the blue line is the MACD line and the orange line is the signal). Should I be looking at only one of these lines on the long-term chart or both of them? I’ve attached a picture of the chart setup that I use. I know this is a newbie question, but I’m very new to trading. Thanks

 

[nonlinear5]

Should I be looking at only one of these lines on the long-term chart or both of them?

MACD is presented as 3 lines:

1. MACD itself
2. The exponential moving average of the MACD
3. The difference between MACD and its exponential moving average

There are multiple ways of interpreting these 3 lines. You may want to read this article:
https://en.wikipedia.org/wiki/MACD

A useful (and intuitive) way to think about MACD is as follows. MACD itself is the first derivative of the price (i.e. velocity). The difference between MACD and its exponential moving average is the second derivative of the price (i.e. acceleration). Incidentally, nothing stops you from estimating the higher-order derivatives, as well.

Another thing to consider is that MACD can be applied not just to price, but to other "observables" (such as volume, for example), and even to other indicators, such as "MACD of RSI".

 

[tommcginnis]

Most traders cannot explain any indicator at random, in words that either/both of their Mother or the 12-year-old from next door, would understand.

Most traders lose money.

Is there a tie there? I think 'yes.'

DON'T ever put A DIME on any "indicator" that you are not sufficiently familiar with it, that you would have NO TROUBLE 'coding' it into a spreadsheet.

DON'T EVER put a DIME on any "indicator" that you cannot describe, with empirical precision, but in simple language, what a "1.50" means, versus the "-0.875" that it read this morning, or the +101.5 that it reads with AAPL versus GLD.

Or, just give away your money now, and at least have some say in the matter.

(I DON'T mean to sound harsh, but very clear. This is real life. If you're just starting out?? Do something that ALMOST NO ONE does: know your shit.)

 

[ross1985]

MACD is presented as 3 lines:

1. MACD itself
2. The exponential moving average of the MACD
3. The difference between MACD and its exponential moving average

There are multiple ways of interpreting these 3 lines. You may want to read this article:
https://en.wikipedia.org/wiki/MACD

A useful (and intuitive) way to think about MACD is as follows. MACD itself is the first derivative of the price (i.e. velocity). The difference between MACD and its exponential moving average is the second derivative of the price (i.e. acceleration). Incidentally, nothing stops you from estimating the higher-order derivatives, as well.

Another thing to consider is that MACD can be applied not just to price, but to other "observables" (such as volume, for example), and even to other indicators, such as "MACD of RSI".

Thanks. I read the wikipedia article, but it's not any clearer to me which line on my chart I should be looking at to determine if the MACD line is angling up or down.

 

[nonlinear5]

Thanks. I read the wikipedia article, but it's not any clearer to me which line on my chart I should be looking at to determine if the MACD line is angling up or down.

You have 6 different indicators plotted on your chart. It is no wonder that you can't figure out which one is MACD.

 

[BONECRUSHER]

Hi,

I’m trying to use the MACD line as one of my indicators. One of my indicators is whether the MACD line is angling up or down on the long-term chart in the direction of my trade. My problem is, I’m having trouble figuring out if I’m supposed to be looking at just one line of the MACD or both lines because they are often angling in different directions. On my live chart I have a blue line and an orange line (I believe the blue line is the MACD line and the orange line is the signal). Should I be looking at only one of these lines on the long-term chart or both of them? I’ve attached a picture of the chart setup that I use. I know this is a newbie question, but I’m very new to trading. Thanks
View attachment 169695

Being "new" can be an edge...an open mind can see what others can't see sometimes! Try looking at MACD without the instructions included...maybe you'll come up with something special. Do this for awhile and then you can "peek"...if you must. Personally, I like the open mind concept for as long as possible. P.S. I can't stand the phrase "am I supposed to be"!

 

[Xela]

I know this is a newbie question, but I’m very new to trading.

That doesn't matter at all.

We were all new to trading once. Nobody was born knowing how to do this stuff.

The problem you have is that you're trying to use an indicator with absolutely no idea how it (allegedly) "works" or what you're trying to display with it (let alone what settings you should be using on it).

And that's because you have an underlying belief that this indicator is going to have some sort of magic predictive properties.

I believe the blue line is the MACD line

That's correct. It displays the difference between the shorter and the longer moving averages. When it's above the midline, the 12-period MA is above the 26-period one.

and the orange line is the signal

Also correct. The orange line represents a 9-period moving average of the blue line.

Should I be looking at only one of these lines on the long-term chart or both of them?

No.

You're going off in completely the wrong direction, trying to use this at the moment.

 

[Handle123]

MACD, books say it is a trend momentum indicator, 12 EMA minus 26 EMA = MACD. 9 period EMA od the MACD is called signal line. The Histogram measures distance of MACD and signal line. I have been using this indicator since early 90s. I tried what Thomas Aspray, developer, said way he uses it, but it never worked profitable for me. The major problem of indicators when they get out to the public, they don't work as intended. To trade well you have to think outside the box. Indicators make patterns based on usually price or volume BUT if you don't have memorized what patterns price does first, indicators will be HORRIBLE for many to use. I can't say this enough, unless you study price well for a few years, indicators will make you lose horrible.

After a few years of studying price and why it does what it does you can add one simple moving average to the chart, perhaps Bollinger Bands and MACD and or RSI below.

When you get to this point and you might not at this point add indicators as you find it profitable enough just using charts, you might use parts of indicators as MACD is very good on weekly then daily divergences and they can be very good for entry signals but not using the signal line as that gives too much false signals.

Learn to program, you can test to your heart's content to find what works for you. But being a newbie you going down wrong path IMHO.

Good luck to you

 

[ross1985]

You have 6 different indicators plotted on your chart. It is no wonder that you can't figure out which one is MACD.

I know where the MACD is. It's directly below the candlestick chart. The line that says MACD (12, 26, close, 9, false, true). The question that I have is how to tell if the MACD is angling up or down.

 

[ross1985]

That doesn't matter at all.

We were all new to trading once. Nobody was born knowing how to do this stuff.

The problem you have is that you're trying to use an indicator with absolutely no idea how it (allegedly) "works" or what you're trying to display with it (let alone what settings you should be using on it).

And that's because you have an underlying belief that this indicator is going to have some sort of magic predictive properties.





That's correct. It displays the difference between the shorter and the longer moving averages. When it's above the midline, the 12-period MA is above the 26-period one.





Also correct. The orange line represents a 9-period moving average of the blue line.





No.

You're going off in completely the wrong direction, trying to use this at the moment.

Thanks Xela. That was helpful. I do realise that using this indicator, which I will likely never fully grasp, is not going to be helpful at all to me. And I don't plan on using it for my own trading purposes. I am currently reading a book where "looking at a longer-term chart to see which way the MACD was angling" was mentioned and I couldn't figure out how to tell that by looking at a MACD chart. I probably should have reworded my thread differently.