Next for me is going to be looking at other well known oscillators, and I think the MACD is one that I’ve heard used a lot but I wasn’t really sure how it was suppose to be used. I also made some changes to the webpage to make the charts a bit easier to see; hopefully those work out.
MACD stands for Moving Average Convergence-Divergence, and it’s suppose to show buy/sell signals. There’s also this thing called the MACD histogram, which I’ve super-imposed on top of the regular indicator; so on the chart there are 2 lines, as well as the histrogram. (I’ll deal with the histogram later
The two lines are called the signal line and the fast line. On my charts the fast line is in blue, and the signal line is in red and dashed. The fast line is made from the difference between the 26 day exponential moving average and the 12 day moving average. The signal line is made from the 9 day exponential moving average of the fast line. I really have 0 clue as to why they pick those numbers, but hey, it’s good to have an idea as to what they are.
Here I highlighted in yellow all of the spots where the MACD is above the 0 line. The red line indicates when the fast/blue line crosses under the signal/red line. Since the fast line is, well, fast, it is always the first to cross the 0 line. I noticed that a buy when the fast line crosses above 0 line and a sell when the fast line crosses under the signal line is not a bad strategy at all.
Box 3 turns out to be a bit of a loss, so I think it’s important to pay attention to the line movement; it makes a sharp turn around towards the 0 line and that’s when price starts moving down, even when it’s not under the 0 line.
Box 5 is a bit of a.. puzzle in this regard. The line is clearly turning south, and the the fast line moves under the signal line, but price continues to move up..