Hi everyone - this is matt from matt stratz. This is the third video of my technical analysis series in this video i'll be covering the moving average convergence divergence indicator more commonly called macd. If you're interested in this type of content hit the subscribe button for more alright. Let's start with the macd indicator: basics.

At the end of the video, i will provide examples on how it can be applied to help make you money in the stock market. Macd is a trend following momentum indicator that highlights the relationship between two moving averages of a stock's price. If you want to learn more about moving averages or need a quick refresher about what they are, i posted an introduction. Video in the description below the macd indicator assists traders in understanding whether the bullish or bearish movement of a stock is strengthening or weakening.

Macd is computed by subtracting the 26 period, exponential moving average or ema from the 12 period ema. The result of this is called the macd line. Next, a nine period, ema of the macd itself, is plotted on top of the macd line. This new line is called the signal line.

I know this calculation can seem confusing at first, but i promise it will make sense. The more you use the indicator. The main thing you need to know is that the signal line functions as a trigger to buy and sell traders can use this indicator by buying a stock when the macd crosses above its signal line and selling or even shorting a stock when the macd crosses below The signal line with that being said: there are multiple ways to use this indicator, but the most common situations - traders look for are crossovers and divergent setups. The concept of divergence is covered thoroughly in the rsi technical analysis, video, if you're interested in learning more about it and how the concept can be applied to the macd indicator.

The link is in the description below the macd has a positive value when the 12 period, ema is above the 26 period ema and a negative value when it is below the more distant. The macd is from the baseline above or below indicates the distance between the two emas is growing. The macd indicator is often displayed with a histogram which graphs the distance between the macd line and the signal line. The histogram value is positive when the macd line is above the signal line.

If the machine line is below the signal line, the histogram value is negative, in other words, high histogram values represent strong bullish momentum and low histogram values represent strong bearish momentum. Now that we covered all of the basics, let's go over a couple examples, as you can see on this chart when the macd rises above the signal line, the indicator is bullish. This suggests it may be a good opportunity to buy the stock. Conversely, when the macd falls below the signal line, the indicator is bearish suggesting it may be time to sell the stock.

From my own experience using the macd indicator, i can positively tell you that the buy and sell signals do not have 100 accuracy. There is potential to be faked out by the signals and have the stock move against you to help filter out these false signals. I would recommend using macd with other indicators such as rsi, regardless of how you choose to utilize, the macd indicator trade with caution. Nothing in the market is guaranteed.

Do you use the macd indicator in your trading? If so, how has it worked for you so far? Let me know in the comments below, if you learned anything or enjoyed the video, i would appreciate it if you could hit the like button thanks for watching and as always may the odds be in your favor. You.