Primary Purpose Of MACD Indicator
ultimate purpose of the Moving Average Convergence Divergence (MACD)
to highlight trending assets and those that are consolidating by
moving averages convergence and divergence.
moving divergence reveals the following:
in bullish momentum in
an up trend,
in bearish momentum in a down trend,
in trading activities,
surplus of volatility.
a trending phase is often
preceded by an
volume, momentum and volatility. Moreover, those surges cause moving
lack of momentum, volatility and balanced trading activities often
cause moving averages convergence.
should not mistake
moving averages divergence
with the normal
bullish and bearish price
only means separated apart, parallel or not touching one another.
the same token, moving averages convergence refers
averages coming close to one
another, or touching one another, grouping in the same
non-trending financial assets (that are consolidating) exhibit
convergent moving averages.
during a consolidation phase one
will notice a low
standard MACD is MACD (12, 26, 9).
market, there is a clear divergence (separation)
MACD and the zero line. Note that
is the moving twelve and the zero line is the moving average
That divergence translates into a wider angle between MACD and the
equilibrium line. In this instance,
there is a divergence between the two moving averages.
it becomes clear that to screen (scan)
for bullish financial instruments, it is not sufficient for MACD to
stay above the zero line but to form a wider
angle with the equilibrium line.
to scan for bearish stocks, MACD should be subzero, and form a wide
angle with the zero line.
a clear divergence from the zero line, MACD converges to the zero
line during the quiet market when the volatility, momentum and
trading activities recede. In reality, during the consolidation
market, MACD oscillates
around the zero line. Moreover, it stays in the vicinity of the zero
line. In this case,
is a convergence between the Moving average twelve (MACD) and
twenty-six (equilibrium line).
convergence of MACD to the zero depicts a low volatility,
momentum, trading activities, and non trending phase (consolidation,
contra-trend or correction). MACD divergence to the equilibrium line
marks a trending market, plus a rising momentum, volatility and
time, one is trading or using the Moving Average Convergence
Divergence (MACD), it is essential to remember its ultimate role that
is to detect tending and non trending financial assets with moving
averages convergence divergence.
there are many other ways day and swing traders use MACD, one ought
other MACD trading strategies with its primary purposes.