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welcome to looking at the markets with
David Moadel i have received requests to
discuss the MACD and so let's go ahead
and do that
alright here we go what is the MACD well
i'm using Apple as an example today
apple stock and this is a daily chart
each candlestick represents one day of
price action and my chart came from
stock charts dot-com just want to give
them credit
alright so the MACD is a quick way of
saying moving average Convergence
divergence macd it's a lot easier to say
macd so we'll just go ahead and call it
that
alright so what is all that stuff mean
it is a momentum indicator that means
that it tells the general direction
okay so are we looking at a stock that
in the short to medium term does it has
tended to trend upward downward sideways
so that's what it does it tells the
general direction in the short to medium
term now you have several parts to the
MACD indicator you have the black line
and that is right here you can see the
black line and that is called the MACD
line that's the that's the black line
then you have the red line
and that is called the signal line
that's the red line and then you have
these blue bars here
kinda looks like a bar graph the blue
bars that's called the histogram so
those are the three parts you need to
pay attention to with the MACD so what
are these three parts while the black
line that's the MACD line now on the
standard macd settings and so if you go
to stock charts dot-com they'll by
default they'll put it on the standard
settings on the standard macd settings
the MACD line it is the 12-day
exponential moving average minus the 26
de exponential moving average so that's
the mathematical formula for the black
line but you don't really necessarily
need to know all of the math involved in
it you just want to know for now since
we're just doing the basics you want to
know that the the black line the MACD
line it gives the short-to-medium term
trend
of the price action in other words has
the stock been trending up or down or
sideways
ok so you can see which way in the short
to medium term in the past with the
black line the MACD line you can you can
glance at it and quickly tell whether it
has recently whether the the stock or
commodity or ETF for currency or
whatever whether the price action lately
has been going down or up or sideways
over here here at jumped-up word it's a
quick way to gauge the short-to-medium
term trend of the price action that's
the MACD line
what about the red line that's the
signal line
well on the standard macd settings it is
the nine-day exponential moving average
of the MACD line or the black line
ok so basically the signal line the red
line is just a smooth out less choppy
version of the MACD line so the as you
can see the the red line
yeah it doesn't chop around as much it
smoother compared to the MACD line and
the signal line is that's less choppy
it's more smoothed out because it's a
moving average of the MACD line to put
it very simply people who use the MACD
can use it as a buy or sell signal and
of course it's not a perfect indicator
it does not work every single time I
don't know any indicator that does so be
aware of that so it can be used however
as a possible buy or sell signal people
they might buy when the MACD line
crosses above the signal line like it
does here and here
ok and they might sell when the MACD
line crosses below the signal line like
it does here crosses below or here
crosses below
what about the blue bars that's called
the histogram on the standard macd
settings it is the MACD minus the signal
line basically it just shows how far
above or below the mac the MACD line is
in relation to the signal line so how
far above or below is the MACD line
compared to its signal line
alright so like for example over here
we can see that the MACD line is above
the signal line
ok it's you can see over here they're
about the same and so the histogram
shows that they're about the same and
then as the MACD line goes more and more
further above the signal line the
histogram grows taller and taller now
over here we can see that the MACD line
is about the same as the signal line and
so the histogram is flat and then as it
goes more and more below its signal line
the histogram reflects that it shows it
by going lower and lower so it just
shows how far above or below the MACD
line is compared to its signal line or
for example over here they're pretty
close together and the histogram is flat
the MACD is a quick way to gauge the
trend of the price action and the
histogram can help to assess the
velocity of the upward or downward
movement how quickly in other words is
it going up or down
what's the velocity the histogram shows
here that it's going down faster and
faster
and over here it's showing it's going up
faster and faster and over here
and here's a long stretch of it just
kind of going sideways maybe with a
slight upward bias but mostly sideways
the relation of the MACD line to the
signal line in other words is the MACD
line crossing above or below the signal
line can be used as a possible buy or
sell signal as well
alright so that's my basic introduction
to the MACD I hope it was helpful and
you can add it to your your toolbox or
Arsenal so to speak of indicators
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lot i appreciate it and I'll talk to you
again soon
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dedicate this video to Wendy hi Wendy
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