Understanding MACD

just plot the MACD along with candles and observe..

MACD just shows momentum

all of these indicators aren't very useful unless you want to code it.. I started off with all these stochastics and stuff but they just show you what you can already see from the price alone.. so it's superfluous

atm I just have moving averages up as support/resistance but to be honest I think they might be fooling me (moving averages will always move to meet price...)

anyway I do nothing but feed my broker so ya..
 
Quote from Technician:

just plot the MACD along with candles and observe..

MACD just shows momentum...
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shows momentum? that's good enough to trade.
 
Quote from Arcanine:

I'd like to understand better the mechanism behind the MACD. I know what a MACD is and how it is calculated, but I want to understand how it is useful in trading, e.g. what does it say about the market. How does plotting the difference of two moving averages as an oscillator give me insight to the structure of the market?

There must be a reason for its continued use by many traders (including successful ones).

Please note: I'm not looking for anyone's opinion about the usefulness of the MACD or of technical indicators in general--that's a different topic. I just want some objective, logical, mathematical discussion about this indicator. Also, I'm not looking for anyone to discuss their personal "setups," unless you feel inclined to do so.

Thanks
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In my prev. post on MACD I hope everyone learned to know when penetration is ripe instead of the usual dopey, ungainly, archaic finger test. :D


But now I'll show you clowns :) :D how the Macd is foretelling ET's Politics forum to take off in a bullmarket of WRATH by being invaded by Israelis especially NOW - because NOW the rally from March 2009 is over and the ISRAELI BEAR continues. God, I feel terribly sorry for the poor 1.5 million concentration-camped Palentinians - they are really fucked, esp. given the precursor of what God's people did to the man devoid of sin & scud missiles, Jesus.

See Israeli Index daily chart ...



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the black rectangle focusses on the entire bull run. The pink dotted horizontal line in the Macd is the 0-line.

notice how the Macd got above the 0-line on Jan 28, 2010? A few days later it dipped below but there was no PRICE violation of the neighboring closing low, so the Long from Jan 28 continues.

You could have just been LONG and gone to sleep for months and months thereafter as the Macd STAYED above the 0-line until april 28, 2010. And on that day, the Macd histogram bar went into a downside hard-on EXACTLY AS STATED IN MY PREV. POST.

You exit there and go on holiday to anywhere but Palestine and if you ever are as unfortunate as I once was when drunk, I licked Israeli pussy, know this, its worse than licking a dinosaur's butt. Don't do it.

Whew! :) :) :D
 
error - sorry

that should read, January 28, 2009 - not 2010.

so the entire bullrun went on for 15 months. The Macd kept you LONG for 15 months as opposed to ET-ers usual 5 minutes in and out with multiple ejaculations daily. What a waste! :) :D
 
Quote from Arcanine:

I'd like to understand better the mechanism behind the MACD. I know what a MACD is and how it is calculated, but I want to understand how it is useful in trading, e.g. what does it say about the market. How does plotting the difference of two moving averages as an oscillator give me insight to the structure of the market?

There must be a reason for its continued use by many traders (including successful ones).

Please note: I'm not looking for anyone's opinion about the usefulness of the MACD or of technical indicators in general--that's a different topic. I just want some objective, logical, mathematical discussion about this indicator. Also, I'm not looking for anyone to discuss their personal "setups," unless you feel inclined to do so.

Thanks
More...


on a more serious note, esp. given that you are very serious about your study of the MACD ....

know this ....

there is NO better indicator and likely there never will be. The Macd makes Prechter's and EWI's favorite, the Relative Strength Indicator (RSI) look like an assinine, hovine, bovine nincompoop.

But to get good at the Macd avoid using it the way the HERD recommends its usage. You will get killed in a sideways market.

You need to step away from the crowd and develop stuff thru' observation of the Macd operating in various instruments over various timeframes. You will get it sooner or later.

Here's one for starters ......

the hook ..... now see if you can figure out this one, OK?

best of luck to you, you're on the right track, don't let these retards dissuade you or throw you off the scent.

good day sir. :)
 
Quote from Arcanine:

I'd like to understand better the mechanism behind the MACD. I know what a MACD is and how it is calculated, but I want to understand how it is useful in trading, e.g. what does it say about the market. How does plotting the difference of two moving averages as an oscillator give me insight to the structure of the market?

There must be a reason for its continued use by many traders (including successful ones).

Please note: I'm not looking for anyone's opinion about the usefulness of the MACD or of technical indicators in general--that's a different topic. I just want some objective, logical, mathematical discussion about this indicator. Also, I'm not looking for anyone to discuss their personal "setups," unless you feel inclined to do so.

Thanks
More...
The MACD is a rather primitive momentum indicator. The idea behind momentum indicators is expounded on by William Blau in his book:

http://www.amazon.com/Momentum-Dire...=sr_1_1?ie=UTF8&s=books&qid=1295285118&sr=1-1

To put my own spin on things, the basic idea is that raw momentum (aka price change) will always lead price, or at the least never lag behind price. Therefore learning to trade using momentum should theoretically never give you late signals. But price is typically noisy and momentum is even more noisy. So smoothed momentum is called for. Whether or not smoothed momentum lags price is a question of the quality of smoothing. Certainly smoothed momentum will never lag price as much as smoothed price, and here is the first flaw of the MACD: rather than smoothing raw momentum, Gerald Appel (the inventor of the MACD) decided to make a momentum indicator out of smoothed price. This is primarily a result of his times: PCs were a new technology back then and not at all widespread, and Appel was looking for a method that could be done by pencil and paper. There are better momentum indicators these days, notably the TSI invented by Blau and explained in his book, and also explained elsewhere in this website which you can find by a simple search.

One caveat: you'll see the misconception that TSI and the so-called Ergodic Indicator are identical. This is false, as can be seen by a simple perusal of Blau's Table of Content (use the "Look Inside" feature at the amazon page). An Ergodic Oscillator (not Ergodic Indicator) can be made to apply to any oscillator. Basically it's just a generalization of what Appel had already done with the MACD: making a signal line and subtracting it to get a "histogram". Blau generalized this procedure to apply to his momentum indicators (aka oscillators) and called it ergodic cuz that soundz kewl, d00d.
 
The purpose of the MACD is to determine momentum of a trend. If the trend is continuing and the market is making higher highs, then you should also see the MACD making higher highs, if it's making lower highs, this is a signal of momentum loss and is a bearish sign. You can call this bearish divergence, and the opposite bullish convergence.

The opposite would be the market making lower lows, but the MACD making higher lows.


Works great to confirm rising wedges/ falling wedges.
 
Quote from joe4422:

The purpose of the MACD is to determine momentum of a trend. If the trend is continuing and the market is making higher highs, then you should also see the MACD making higher highs, if it's making lower highs, this is a signal of momentum loss and is a bearish sign. You can call this bearish divergence, and the opposite bullish convergence.

The opposite would be the market making lower lows, but the MACD making higher lows.


Works great to confirm rising wedges/ falling wedges.
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Price and volume work a lot better..and faster. P&V is getting it right from the teat. Hot N wet. MACD is like buying a quart at walmart a week later
 
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