Moving Average Convergence/Divergence (MACD)
read more hereAs a tool for long term trading the MACD fails and can’t compete with its less evolved relative the Moving Average Crossover. As a tool for short term trading (4 days on average) the MACD is very powerful in theory but with such a small average return the practical applications are limited. As a tool for medium term trading the MACD should not be your first choice on the Long side of the market BUT on the Short side the MACD is simply outstanding! Using a ‘Fast’ Moving Average of 16, a ‘Slow’ Moving Average of 97 and a signal line of 2 you have a powerful indicator for taming the bear.
In an attempt to limit the length of this article we only published results from trades off the Signal Line when the MACD line was above zero (when Long) or below zero (when short). Please note however that trying the trade the MACD when it is on the wrong side of zero will lead to an unhappy bank account, an unhappy wife and an unhappy life.
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