MACD INDICATOR – Determining Market Trends

Using the MACD Indicator to Determine Market Trend

Dr. Thomas Carr

MACD is an extremely popular technical indicator.  The name stands for “Moving Average Convergence Divergence.”  The MACD is so named because it uses moving averages (two of them) to render a visual picture of times when those moving averages are either converging on each other or diverging from each other.  The changing posture of these two moving averages relative to each other, either converging or diverging, gives the market technician information that can be used in rending judgments about where the security might be heading in the near future.

A market technician is someone who analyzes the historical price chart of a security and makes judgments based upon that chart.  Market technicians use the MACD indicator to determine three things about the price chart:

  • The general trend of the security, up or down
  • The momentum of the trend, strong or weak
  • The opportune times to buy or sell shares (or contracts) of the security

The MACD indicator is composed of three parts:

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Tom
Dr. Thomas K. Carr (aka “Dr Stoxx”) is the Founder and CEO of DrStoxx.com which publishes 4 market letters every week, in addition to offering trader education and coaching services. Dr. Carr holds a D.Phil. degree from the University of Oxford and a Masters from Princeton. For 17 years he was a tenured professor to undergraduate students. He currently is a fulltime trader, market analyst, trading systems developer, and trainer of traders. The management company he founded, Kingdom Capital, trades accounts for private clients.

Dr. Carr is author of three bestselling trading books including, Trend Trading for a Living (McGraw-Hill, 2007), which has sold over 50,000 copies, with translations in Chinese, Japanese and Korean. Dr. Carr’s insights into the markets have been published in The Wall Street Journal, US News and World Report, Investors Business Daily, and Technical Analysis of Stocks and Commodities.

Tom

Dr. Thomas K. Carr (aka “Dr Stoxx”) is the Founder and CEO of DrStoxx.com which publishes 4 market letters every week, in addition to offering trader education and coaching services. Dr. Carr holds a D.Phil. degree from the University of Oxford and a Masters from Princeton. For 17 years he was a tenured professor to undergraduate students. He currently is a fulltime trader, market analyst, trading systems developer, and trainer of traders. The management company he founded, Kingdom Capital, trades accounts for private clients. Dr. Carr is author of three bestselling trading books including, Trend Trading for a Living (McGraw-Hill, 2007), which has sold over 50,000 copies, with translations in Chinese, Japanese and Korean. Dr. Carr’s insights into the markets have been published in The Wall Street Journal, US News and World Report, Investors Business Daily, and Technical Analysis of Stocks and Commodities.

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