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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: MechanicalMethod who wrote (11097)	1/30/2001 5:08:34 PM
From: HairBall	Read Replies (2) \| Respond to of 12039

MechanicalMethod: You don't understand how the MACD formula works. You can't throw out the 21, 34 or 5. The blue line is a product of the 21 and 34 with the red line being that product smoothed by 5 intervals to act as a signal line. By the way, I've been using the above combination for several years...<g> They work fairly well, but I would never use them as a stand alone signal. Regards, LG Attachment: The Moving Average Convergence Divergence (MACD) Trading Method is a price momentum indicator developed by Gerald Appel. This oscillator is based on the point spread difference between two exponential moving averages of the closing price. The two exponential moving averages used are: A 12 period exponential moving average . A 26 period exponential moving average. The difference between these exponential moving averages is then smoothed by a 9 period exponential moving average. This is called the signal line. When MACD is negative and below the signal line, you are poised for a buy signal. This occurs when MACD rises above the signal line. Likewise, when MACD is positive and above the signal line, you should be ready to sell (sell short) when it drops below the signal line. MACD is sometimes plotted as a histogram, but is much easier to see when plotted as a line. This makes identification of the exact crossover points much easier.

To: MechanicalMethod who wrote (11097)	1/30/2001 6:39:30 PM
From: TechTrader42	Read Replies (2) \| Respond to of 12039

MechanicalMethod: MACD is made up of two lines. One, the fast line, is the shorter-term MA (e.g., 21) minus the longer-term MA (e.g., 34). The other, the signal line, is a smoothed version of the fast line, an EMA of the fast line. You just take that fast line and plot its 5-day EMA (e.g., with 21/34/5) to get the signal line. The difference between these two lines is the histogram, which Chris didn't include in his chart. As to the best signals, who can say? It depends what you're looking for, your time frame, your trading style, etc. There are as many ways to approach it as there are twists and turns in the plots. I tend to focus on the histogram, but I found Chris' chart without the histogram revealing.