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Using The MACD Indicator - How To Trade Penny Stocks

 

 

Breakdown of The MACD Indicator

 

The MACD Indicator otherwise known as the Moving Average Convergence Divergence is one of the easiest indicators to understand and learn. This is by far once of the best chart momentum indicators and in many situations can turn great profits. The MACD indicator is two moving averages moving in their determined directions. The longer moving average and the shorter moving average crossing above or below the other. What this does is gives us a short term indicator of which direction the stock may be going. When the MACD crosses below the signal line this will give us what is called a sell signal, when the MACD crosses above the signal line this will give us a MACD buy signal.Often times the MACD buy and sell signals can be a little late typically just after the direction move of the chart is already setting into place but this is not to say that large profits can not be made and losses be saved by studying and watching the MACD. Many of the best traders we know trade utilizing the MACD signals daily so this is a very necessary tool to utilize. Also do not just look to the MACD for buy opportunities, there are various times that you can exit a position just in time by watching the MACD cross to a sell and counteracting..

Keep in mind while day trading stocks, you want to get familiar with multiple indicators. This way you can get comfortable with the particular signals that the current chart is showing you. Once you are able to establish the positives and minus's of each indicator you will be able to react and counteract with a fluid motion based on what you are truly seeing. The MACD is a great indicator, it typically gives you signals a little bit late. For this reason I will often anticipate the time period I feel will be in place until the net positive cross over. Every trader eventually develops his or her own trading style, once you are comfortable with the action and reaction time periods in your own indicators the guessing will stop and trading stocks with consistent profits will be as easy as reading a Dr Suess book.

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MACD Example

 

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