Before discussing the MACD please enjoy a brief moment of RAGE in 3….2….1
So you’ve watched a few videos on youtube and you’re scanning the comments section only to find someone claiming “all indicators are useless”. In fact, if you scan the comments of this site you will certainly find the same. Without fail, study any media stream and there will always be someone claiming indicators are garbage.
The joke however are those that go out of their way to provide such uselessness. They have provided no solution but have made well sure to stop in and spew their particular brand of poison. How does this help? (It doesn’t) It’s no more than an attempt for them to feel smart or powerful or persuasive, or any number of other selfish emotions as they provide nothing. THEY SHOULD BE IGNORED
Ok, my apologies for that but it infuriates me to say the least and this post may just find a few such folks before I’m done.
Alright….MACD. The most powerful indicator. Well, I guess that’s debatable but it think it is and I’ll try to explain.
- Its versatile.
- Its widely used.
- It makes sense.
- If used appropriately.
- If used the same way each time.
I won’t rehash the topic of versatility much more than to say you should consider reading this post for a complete discussion about the versatility of the MACD. In it I detail the 3 most important MACD functions and how to apply them to your charts.
The second invaluable function of the MACD really requires nothing from you other than to know that the information you take away from the indicator is, in fact, useful. Why? Because others are using it….a lot of others.
Finally, because its easy.
You don’t have to be a market wizard to identify a divergence or to see that two lines are crossing over. Just verify the particular function of MACD you’re trying to utilize and let that guide your decision making.
HOWEVER – Be sure to always use MACD in the same manner. Determine exactly how you’ll use divergences to make decisions and don’t change every time you open a chart. For example, suppose I’ve become accustomed to using the MACD histogram to find price divergence signals, now suddenly I’ve started using the signal lines. In honesty, both can be effective but it changes the way you receive and interpret the information, even if you don’t realize it.
The true BIG idea behind successful trading can’t be taught or learned quickly, its more of a feeling. Not really a guess…umm…more like an instinct. You see several factors collectively occurring and you make your move. The MACD will help you train yourself for that level. Trust me, it exists and it will come. Here is a discussion thread I found particularly interesting about the topic of “feeling” the market.
So there is my rant and my thoughts on why the MACD makes sense or doesn’t, in either case feel free to reach me if you have questions.
May God bless and keep your trading profitable,