MACD

MACD stands for Moving Average Convergence / Divergence, created by Gerald Appel in the 1960s. It is read as "Mac D (dee)" as usual but has no realtion to a hamburger shop somewhere.

It shows the difference between a fast and slow exponential moving average (EMA) of closing prices.

I perfer MACD, so the technical analysis gives relatively accurate information of the trade signals, as long as I use.


when you consider the price of tomorrow, which data is helpful, yesterday's data or data of 10 days before? Or in more extreme case yesterday's 1 dollar rising or those of 1 year before?

Of course, yesterday's rising of 1 dollar helps us to consider today's currency movement more than that of 1 year before.

MACD includes in its moving average this idea. And the name of MACD represents the characteristics of an abbreviation in English, i.e. “Moving Average Convergence / Divergence Trading Method”. On the base of moving average MACD adds another mathematic means to its arsenal.

Well, in MACD Exponentially Weighted Moving Average (as known as EMA) is employed. It applies weighting factors which decrease exponentially. The weighting for each older data point decreases exponentially, giving much more importance to recent observations while still not discarding older observations entirely. The graph at right shows an example of the weight decrease.

It is a little complex, but don't worry. On the trade terminal NetTradeX you do not have to calculate MACD, but it is automatically completed by your trade terminal. So we shall pay attention, how to trade, using this technical analysis.



Traide chance according to MACD is shown by golde cross and/or dead cross of MACD and its signal. In other words, MACD moves more quickly than the signal, so “buy signal” appears when MACD go through the signal from the bottom to the top, and to the contrary "sell signal” is observed when MACD moves from the top through the signal to the bottom.



Another way is a zero-based view. If MACD and the signal are over the zero line, the currency course may have a upward trend. If they are below the zero line, the course can be on the downward trend.

These two views help traders to set buy/sell positions adequately with a market trend.