The MACD Indicator: The Definitive Guide pdf is an awesome investing book. The MACD Indicator: The Definitive Guide pdf free book really embodies what the title is all about. However, finding The MACD Indicator: The Definitive Guide pdf free download online is not as convenient as it used to be. The MACD indicator, which stands Download The Macd Indicator Revisited [PDF] Type: PDF. Size: KB. Download as PDF Download as DOCX Download as PPTX. Download Original PDF. This document was The MACD Indicator: The Definitive Guide pdf is an awesome investing book. The MACD Indicator: The Definitive Guide pdf free book really embodies what the title is all about. 10/06/ · MACD True Indicator for MT4 - OVERVIEW. The MACD (moving averages convergence divergence) True indicator is a momentum trend-following indicator that in this paper, we will focus on the macd indicator for four currencies namely b. technical analysis in forex eurusd, gbpusd, usdchf and usdjpy individually to technical analysis (ta) or ... read more

Your MACD line is the day exponential moving average EMA less the day exponential moving average EMA. You can use closing price for this moving average. The 9-day EMA acts as a signal line and identifies turns because it is plotted with the indicator. For the histogram, it represents the difference between MACD and its 9-day EMA Signal Line. If the MACD line is above its Signal Line then its positive and if the MACD line is below its Signal Line, then it is negative.

You can substitute other values depending on your preference and goals. MACD has two moving averages with different speeds. In other words, one will be quicker to react to price swing movements than the other one. If a new trend occurs, the fast line will start to cross the slower line. For this reason, the fast line will diverge or move away from the slower line, often indicating a new trend.

You can see in the image above that when the lines cross, the histogram temporarily disappears because the difference between the lines at that time is 0. If moving averages move towards each other, it means that a Convergence is occurring. On the other hand, a divergence occurs when the moving averages move away from each other. There are three different methods to interpret Moving Average Convergence Divergence MACD.

It trails average line and helps determine the turns in the MACD. It shows bullish crossover when the MACD crosses above the signal line, and a bearish crossover if it turns below the signal line. As shown above, the chart clearly shows how a buy entered after the bullish crossover can be profitable. This strategy can also be used to manage or close a short entry. When the MACD line moves above the zero line to turn positive, then a bullish center-line crossover occurs.

This occurs when the day EMA moves above the day EMA. If the MACD line moves below the zero line to turn negative, then it is a bearish center-line. This occurs when the day EMA moves below the day EMA. This shows a point where the MACD does not follow price action and deviates. The use of Relative Vigor Index is to measure the strength of a trend by comparing the closing price of a security to its price range and smoothing the results with EMA.

In fact, the basic point of combining these tools is to match crossovers. To put it differently, if one of the indicators has a cross, you wait for a cross in the same direction as the other one.

If it occurs, you buy or sell the equity and hold your position until the MACD gives you a signal to close the position. See image below;. The chart above is the minute chart of Citigroup from December , It illustrates that there are two short and one long setups that occur after a crossover between the MACD and the RVI. The green circles are crossovers and the red circles are where the position should have been closed. The Money Flow Index — MFI is a type of oscillator that uses both price and volume on measuring buy and sell pressure.

It generates less buy and sell signals compared to other oscillators, for the reason that the money flow index requires both price movements and surge to make extreme readings.

If the MFI gives you a signal of a bearish cross over the MACD lines, there is a potential short trade. This strategy is the same way in the opposite direction for long trades. The chart above is the minute chart of Bank of America BAC. The green circle is the moment when the MFI is signaling that BAC is oversold. After 30 minutes, the MACD has a bullish signal and is now open for a potential long position at the green circle highlighted on the MACD.

You hold your position until the MACD lines cross in a bearish direction as shown in the highlighted red circle on the MACD. To sum up, this position lets you profit an amount of 60 cents per share for about 6 hours. The use of Triple Exponential Moving Average — TEMA is to filter out volatility from conventional moving averages.

It is made up of a single exponential moving average, a double exponential moving average, and a triple exponential moving average. It can generate a trade signal when the fast line crosses the MACD and the price of a security breaks through the TEMA. You will exit positions whenever you receive contrary signals from both indicators.

It is a very simple reliable Indicator. Also it is an Indicator a TA enthusiast gets introduced to first. The MACD is constructed by subtracting the longer moving average from the shorter moving average.

The resulting plot forms a line that oscillates above and below zero, without any upper or lower limits. The MACD is considered to be a momentum oscillator though it is widely used by Trend followers. The most popular formula for the MACD is the difference between the day and day exponential moving averages.

I will use this standard setting and later if time permits I will try to present other combinations. A 9-day EMA of the MACD line is used as the signal line. Chart —1 A positive MACD indicates that the shorter EMA is greater than the longer EMA indicating that momentum is positive.

A rising MACD indicates the difference between the short EMA and the long EMA is increasing and in other words indicates a rising momentum. In the same way a negative MACD indicates that momentum is negative and a falling MACD indicates an increasing negative Momentum. MA cross over or signal line crossover. The basic and the most common is the signal line cross over.

Buy when the MACD line crosses above the signal line and Sell when the MACD line crosses below the signals line. Zero Line crossover.

Some use only the zero line cross over as signals. Buy when the MACD line crosses the zero line and Sell when the MACD line crosses below the zero line. Divergences Let us see in a little detail what happens when the moving average cross over and zero line cross over occurs. Let us assume that the stock is in a downtrend and the MACD is below the zero line and below the signal line.

Then when the Bullish moving average cross over MACD crossing the signal occurs the shorter EMA has started converging towards the long EMA indicating the negative momentum is waning. It does mean that the bullishness will continue. It may or may not. So a Buy when the Bullish cross over occurs does not always produce a good trade.

Now consider when the stock is in an up trend and the MACD is above zero and the signal line. If a Bearish cross over occurs MACD crossing below the signal line the short EMA has started to converge towards the long MA indicating that the positive momentum is waning.

It again does not indicate that bearishness has set in. It may be just a pull back. The stock may dip and then continue its journey upwards. When the MACD cross above the zero line it mean that the short EMA has actually crossed over the long EMA indicating that the momentum has indeed reversed from negative to positive.

In the same manner the when the MACD crosses below the zero line it means the momentum has turned negative. The Bullish zero line cross over generally gives better trades. But many times it will notice you are entry is much delayed. The Bearish zero line cross over gives too much of your profits and some time one loses money too. To summarize 1.

Buying based on Bullish MA cross over does always produce good trades. However in many cases this does helps in early entry points. How to distinguish is the problem. Combining with other Indicators may help. We will explore this later. Selling based on Bearish MA cross over may take you out of the trade too soon. Again combining with other Indicator may be of help in deciding if it is time to get out.

Bullish zero line cross over generally prove profitable. The drawback again the entry point may be delayed in many cases. Selling based on Bearish zero line cross over may give away too much of your profit.

A trailing stop may help in over coming this issue Chart-2 illustrates some of these points. We will postpone discussion on this till little later. Now Let us take a deeper look at the MACD charts and try to learn a little more about the additional signals that we get and how to trade them.

So far we were talking about Bullish crossover after a downtrend. In this case the Bullish crossover occurred below the zero line. However the Bullish crossover can occur above the zero line. Such crossover occurs when the stock dips temporarily before proceeding with the up trend.

Such crossovers above the zero line produce some excellent trades. Bearish crossovers occurring above the zero line generally acts as warning signals as it indicates waning of the positive momentum. Bearish crossover below the zero line indicates strong bearishness.

For the making the discussion more interesting we will first make a system with the following criteria. BUY when there is a Bullish MA crossover. SELL when there is a Bearish MA crossover. Additionally the zero line bullish crossovers will be marked with an encircled number 1 with an arrow pointing upwards in order to indicate that the momentum has indeed reversed. Bullish crossovers above the zero line will be marked an encircled number 2 and arrow pointing upwards indicating good trade opportunities.

Similarly bearish crossover above the zero line will marked 3 and bearish crossover of the zero line will be marked 4. You will notice that the MACD line temporarily converges towards the signal line and diverge again. We will call them DIPs. Some times the MACD line even briefly dips below the signal line and bounce back. We will call these HOOKs.

The DIPs and HOOKs normally indicate brief pullbacks in the up trend and provide good add-on or pyramiding opportunities. In the same manner DIPs and HOOKs occur during the downtrend when the MACD line is below the signal line.

These indicate temporary pull up during down trends and present good shorting opportunities. We will represent the DIPs during the up trend as green dots on the Indicator and green up arrows on the charts. Green stars will represent the HOOKs. On the Chart the HOOKs will be coincide with a BUY.

In the same way DIPs during a downtrend will be represented by an orange dot on the Indicator and an orange down arrow on the chart. The HOOKs will be represented by a orange star and will be accompanied by a sell signal on the chart. Sideways markets produce lot of alternating Hooks Of course we have to have a lot of discretion when we used the Dips and Hooks. Later we will take some example to see how we can use these additional signals. Take a situation when the MACD Line starts converging from top above the Zero line towards the zero line.

At times the MACD line reverses and just near the zero line and starts climbing up again. At times the MACD line penetrates the zero line a little and starts reversing. These reversals many times produce excellent trades. These reversals just above the zero line or after just penetrating the zero line are called the Zero line rejects.

The situation described above will be Bullish ZLR. A bearish ZLR occurs when the MACD line climbs from the bottom towards the zero line and reverses just below the zero line or after just penetrating it.

Of course one should be quite careful trading the ZLR as it may be a temporary reversal. Working with tight stop losses can produce some excellent trades.

Chart-6 shows some Bullish ZLR. Without complicating further with Histograms we will see how to trade better these signals. Trading MACD better combining with other Indicators Well, we have many signals now. How do we differentiate which are better signals?

Trading just with the MACD does not provide much clue. If we combine with some other indicators we may get some more clues. Combining with ADX provides some good additional clues and we can differentiate which are better signals. I call these signals Power Buys, Power Dips and Power shorts.

We will take up some example and define some basic rules, which can be consistently followed. To differentiate these from other signals we will call then Power Buys, Power Dips etc.

So eyeballing becomes necessary. Check out Example —1 We will the standard ADX 14 here along with the MACD. RULE: When Bullish and Bearish signals are appearing alternately in quick succession it shows period of indecision and better to stay away.

Since ADX is a lagging indicator many times the ADX reacts only after a BUY or SELL condition occurs. Many times a Power dips comes after a BUY condition indicating good entry opportunity. However it does give some indications regarding the strength of a move. I will just briefly describe them here and leave it you to experiment further.

We will use a stochastic K 15,5 The stochastic rising from the oversold region quickly reaching the over bought region in few trading session 5 or 6 and this is accompanied by a power Buy signal indicates a bullish move is ahead. In the same manner a swift move from the over bought region to the oversold region and accompanied by a power Sell signal will indicate a strong bearish move.

Example —4 shows a bullish move. Example-5 shows a Bearish move. When the stochastic is coming down from over bought region and turn back and if the MACD is positive it represents good bullish moves. In a similar way when the stochastic is rising from the over sold region and then turns back and if the MACD is negative it represents strong bearish moves.

This provides good shorting opportunities. See Example 6. For this first we will have to compare the weekly charts with the daily charts. Changing time frames again and again to check is not a bright thing to do and it is cumbersome.

So we have to have the Weekly MACD overlaid with the Daily MACD. Two MACD plot on the same can be confusing. So we will plot the Weekly MACD as a ribbon on the daily MACD Here is where metastock gets a beating. This can be easily done in AB. We will color code the ribbon for easy understanding as follows Weekly MACD above signal line but below zero.

Pale green Weekly MACD above signal line and zero.

Oscillating indicators are to show securities when they are overbought or oversold allowing a trader to enter at the best possible price. There are different types of momentum oscillators a trader can use, and the MACD is one of the most popular. In this guide we are going to concentrate on the MACD and how to combine with other strategies to enhance a trading strategy. NOTE: Get the Free MACD PDF Guide Download Below. Free PDF Guide: Get Your MACD Trading Strategies PDF Guide.

Not including the moving average, the MACD is the second most popular trading indicator. The Moving Average Convergence Divergence MACD is a technical indicator used to identify new trends or momentum and show the connection between the price of two moving averages. MACD fluctuates above and below zero lines, highlighting both momentum and trend direction as the moving averages converge and divergence.

Your MACD line is the day exponential moving average EMA less the day exponential moving average EMA. You can use closing price for this moving average. The 9-day EMA acts as a signal line and identifies turns because it is plotted with the indicator. For the histogram, it represents the difference between MACD and its 9-day EMA Signal Line. If the MACD line is above its Signal Line then its positive and if the MACD line is below its Signal Line, then it is negative.

You can substitute other values depending on your preference and goals. MACD has two moving averages with different speeds. In other words, one will be quicker to react to price swing movements than the other one. If a new trend occurs, the fast line will start to cross the slower line.

For this reason, the fast line will diverge or move away from the slower line, often indicating a new trend. You can see in the image above that when the lines cross, the histogram temporarily disappears because the difference between the lines at that time is 0.

If moving averages move towards each other, it means that a Convergence is occurring. On the other hand, a divergence occurs when the moving averages move away from each other. There are three different methods to interpret Moving Average Convergence Divergence MACD.

It trails average line and helps determine the turns in the MACD. It shows bullish crossover when the MACD crosses above the signal line, and a bearish crossover if it turns below the signal line. As shown above, the chart clearly shows how a buy entered after the bullish crossover can be profitable. This strategy can also be used to manage or close a short entry. When the MACD line moves above the zero line to turn positive, then a bullish center-line crossover occurs.

This occurs when the day EMA moves above the day EMA. If the MACD line moves below the zero line to turn negative, then it is a bearish center-line. This occurs when the day EMA moves below the day EMA. This shows a point where the MACD does not follow price action and deviates.

The use of Relative Vigor Index is to measure the strength of a trend by comparing the closing price of a security to its price range and smoothing the results with EMA. In fact, the basic point of combining these tools is to match crossovers. To put it differently, if one of the indicators has a cross, you wait for a cross in the same direction as the other one.

If it occurs, you buy or sell the equity and hold your position until the MACD gives you a signal to close the position. See image below;. The chart above is the minute chart of Citigroup from December , It illustrates that there are two short and one long setups that occur after a crossover between the MACD and the RVI.

The green circles are crossovers and the red circles are where the position should have been closed. The Money Flow Index — MFI is a type of oscillator that uses both price and volume on measuring buy and sell pressure. It generates less buy and sell signals compared to other oscillators, for the reason that the money flow index requires both price movements and surge to make extreme readings. If the MFI gives you a signal of a bearish cross over the MACD lines, there is a potential short trade.

This strategy is the same way in the opposite direction for long trades. The chart above is the minute chart of Bank of America BAC.

The green circle is the moment when the MFI is signaling that BAC is oversold. After 30 minutes, the MACD has a bullish signal and is now open for a potential long position at the green circle highlighted on the MACD.

You hold your position until the MACD lines cross in a bearish direction as shown in the highlighted red circle on the MACD. To sum up, this position lets you profit an amount of 60 cents per share for about 6 hours.

The use of Triple Exponential Moving Average — TEMA is to filter out volatility from conventional moving averages. It is made up of a single exponential moving average, a double exponential moving average, and a triple exponential moving average. It can generate a trade signal when the fast line crosses the MACD and the price of a security breaks through the TEMA.

You will exit positions whenever you receive contrary signals from both indicators. The image below is the minute chart of Twitter. In its first highlighted green circle you can clearly see that you have the moment when the prices switch above the period TEMA.

The MACD confirms a bullish TEMA signal on the second highlighted circle. This is when you open your long position. As shown above, the price increases and you get your first closing signal from the MACD in about 5 hours.

The price of twitter breaks the period TEMA in a bearish direction after 20 minutes and you close your position. As can be seen, it generated a profit of 75 cents per share. The use of a Triple Exponential Average — TRIX is to be a momentum indicator.

It is an oscillator used to identify oversold and overbought markets. This gives you the tighter and more secure exit strategy. You exit the market right after the trigger line breaks. This strategy is riskier because if there is a significant change in trend, you are in your position until the zero line of the TRIX is broken. It could take a while for that to happen. The image above shows the minute chart of eBay. As shown above, the first green circle is a long signal that comes from the MACD.

The second highlighted green circle is when the TRIX breaks zero and you enter a long position. On the other hand, the two red circles show contrary signals from each indicator. In the first case, the MACD gives you the option for an early exit, while in the second case, TRIX keeps you in position.

By using the first exit strategy, you would have gained a profit of 50 cents per share, while the alternative approach will generate a profit of 75 cents per share. The use of this indicator is to measure market momentum. The Awesome Oscillator calculates the difference of the 34 and 5-period Simple Moving Averages.

You will enter and exit the market only when you receive a signal from the MACD, confirmed by the awesome oscillator. Below is the minute chart of Boeing. The two highlighted green circles are signals that indicate to open a long position.

The Awesome Oscillator gives you a contrary signal after going long. Yet, the MACD does not produce a bearish crossover, so you stay with your long position. The first red circle highlights when the MACD has a bearish signal. The second red circle highlights the bearish signal generated by the AO and you close your long position. The best thing about the MACD indicator is that it brings together momentum and trends into one indicator. I hunt pips each day in the charts with price action technical analysis and indicators.

My goal is to get as many pips as possible and help you understand how to use indicators and price action together successfully in your own trading. Skip to content. Table of Contents. Featured Brokers IC Markets. Tightly regulated around the world Small minimum deposit Superior trader support Latest trading platforms Very small trading costs.

Trade Now. Pip Hunter I hunt pips each day in the charts with price action technical analysis and indicators.

Download The Macd Indicator Revisited [PDF] Type: PDF. Size: KB. Download as PDF Download as DOCX Download as PPTX. Download Original PDF. This document was The MACD Indicator: The Definitive Guide pdf is an awesome investing book. The MACD Indicator: The Definitive Guide pdf free book really embodies what the title is all about. In this article, we will show MACD which has two lines and offers better visual representation. First, you can download it for free and enjoy our article. Download MACD Indicator MT4 The MACD indicator consists of two lines: the MACD line and the Signal line. The MACD line is the difference between a 12 and a 26 period EMA of prices and is plotted as a solid line. The The MACD Indicator: The Definitive Guide pdf is an awesome investing book. The MACD Indicator: The Definitive Guide pdf free book really embodies what the title is all about. However, finding The MACD Indicator: The Definitive Guide pdf free download online is not as convenient as it used to be. The MACD indicator, which stands Technical Indicators Technical indicators can be classified into two major categories: trend followers and counter-trend indicators. In this section we will discuss briefly one of the most ... read more

We are talking of probability. The resulting plot forms a line that oscillates above and below zero, without any upper or lower limits. Now Let us take a deeper look at the MACD charts and try to learn a little more about the additional signals that we get and how to trade them. years from January to December is used. Also one can experiment with MACD of other types of moving averages like weighted Moving averages, Adaptive moving averages like KAMA, VIDYA, and MAMA etc.

pips loss generated by buy orders included pips profit and pips loss. We will explore this later. Keep in mind that the MACD is not a magic bullet at the end of the day. Moreover, it shows this indicator is producing more profitable buy signals compared to