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Fawkandles

Macd Analysis

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Greetings

I have been brushing up on my MACD analysis. I vaguely remember learning about it as a student but forgot everything from my degree about a year after graduation.

Anywho, does anyone else use it in their trading?

I am experimenting with it for entry/exit points on my trades this month, and so far it has helped. I feel like before I used it I could spot that prices were due a change, but with MACD I can pinpoint WHEN to take action much better. Been using the 12/26/9 model, but when should I NOT use this model?

I can probably learn more by nerding up and reading more, but any strategy chitchat would be cool :)

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Here is an example of where it worked a treat - http://www.barchart.com/chart.php?sym=CAZA.LS&style=classic&p=DO&d=M&x=18&y=12&size=L&log=0&ed=12/02/2010&v=0&divd=1&o1=&o2=&o3=&ch1=011&ch1a=&ch1b=&ch1c=&ov1=056&ov1a=12&ov1b=26&ov1c=9&ch2=058&ch2a=12&ch2b=26&ch2c=9&ov2=&ov2a=&ov2b=&ov2c=&submitted=1&fpage=&txtDate=12/02/2010#jump

I bought in on the 7th Nov as the crossover happened in the MACD, and the price shot up as it should. Textbook MACD prediction. (The subsequent drop was due to an unpredictable dilution)

However, looking back for example at AVN (which I have NOT used MACD on) there are signals given by MACD which would have been foolish to follow -

http://www.barchart.com/chart.php?sym=AVN.LS&style=classic&p=DO&d=M&x=18&y=12&size=L&log=0&ed=12/02/2010&v=0&divd=1&o1=&o2=&o3=&ch1=011&ch1a=&ch1b=&ch1c=&ov1=056&ov1a=12&ov1b=26&ov1c=9&ch2=058&ch2a=12&ch2b=26&ch2c=9&ov2=&ov2a=&ov2b=&ov2c=&submitted=1&fpage=&txtDate=12/02/2010#jump

Take a look at the 26th Sep, a clear signal to sell according to MACD. Fair enough it lost momentum but it didn't fall. The MACD would suggest doomsday was approaching?

I have picked these examples because there was no major news released around these times, as this stuff can make MACD useless. The 2 points I have used as examples are where MACD should be useful...

Edited by Fawkandles

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Greetings

I have been brushing up on my MACD analysis. I vaguely remember learning about it as a student but forgot everything from my degree about a year after graduation.

Anywho, does anyone else use it in their trading?

I am experimenting with it for entry/exit points on my trades this month, and so far it has helped. I feel like before I used it I could spot that prices were due a change, but with MACD I can pinpoint WHEN to take action much better. Been using the 12/26/9 model, but when should I NOT use this model?

I can probably learn more by nerding up and reading more, but any strategy chitchat would be cool :)

Yes I use MACD in conjunction with RSI Volume and EMA, 12/26/9 is the one I use also. Forget about reading up on the rational about it. I tried that and promptly forgot it 10 mins later, so long as you know when something is oversold or overbought and when the signal line crossses the trend line the trend is changing you'll be fine. I use the 15 and 30 min chart on a daily basis, the daily every now and then just to get a bigger picture and then use the 1 min chart to time an entry. Works for me.

Edited by smeagold

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Thanks Smeagold.

I added another post possibly whilst you were typing. What do you think of the 2 dates I link to and whether MACD should have been used?

A veteran's opinion would be swell :)

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Thanks Smeagold.

I added another post possibly whilst you were typing. What do you think of the 2 dates I link to and whether MACD should have been used?

A veteran's opinion would be swell :)

Yes I think they were worth a punt based on MACD but technicals is just an aid you can't trade just on them alone you must understand the fundamentals of the stock your buying but also the larger macro economic picture and trend.

Buy the dips, everything is backstopped

http://www.youtube.com/watch?v=jllJ-HeErjU

Edited by smeagold

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Good idea. I am looking into using TA for AVN. Its a slow moving stock that isn't so news-driven. I think since the satellite launch it will be very trendy in the TA sense.

Otherwise CAZA is a great TA stock as I mentioned above. Due a up-swing soon too, for a practice :)

It is somewhat news driven, but not that much. It has trickles of news for prospects it has small stakes in. It is actually quite unresponsive to the news and trends more 'generally'. ISAble too, with lots of reasons to go up more yet.

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Fully explained here

http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:moving_average_conve#moving_average_conve

Bear in mind the MACD line (black) is the difference between the faster and slower averages (in your case 12,26 ema), the black line (MACD) crosses the centre line (zero) when the 2 averages cross, the black (macd) line crosses the signal line (red 9 ema in this case) as the histogram turns negative or positive (crosses centre zero line). So, if the black line (MACD) is below the red signal line, but above the centre (zero line), then the two averages haven't crossed - the faster ema is still above the slower ema - even though it has crossed it's own (MACD) ema (the red signal line).

It's helpful for measuring trend and momentum but of course it's based on moving averages which are by definition lagging indicators derived from price movements, so that has to be borne in mind too.

2p 'orth.

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I took the plunge and doubled my investment in CAZA today, based on MACD. (I already like the fundamentals, and I SURELY can't get whomped by another dilution!)

The price was flat all day, as it should have been according to MACD. The next trading day or two should see me vindicated. :)

Edited by Fawkandles

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I'm very interested in TA, but invest on analysis of the fundamentals alone these days. Of all the approaches, it''s an understandinf of price channels / supporting trend lines and major resistances that are most useful to me.

Price versus value now and future projected value. That's my approach. Peer group comparison is also valid, particularly in the mining sector.

MACD crossovers can be a good indicator of a change in trend to time a buy, but MACD and RSI are useless for predicting when might be a good point to sell IMO. Technically overbought shares can continue to rise strongly if sentiment is behind them and the company's market cap is a crazy reflection of true value.

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All I can say, other than quit the nonsense, is only play around like this when you have a sufficient portfolio that losing whatever you are betting on TA won't affect you at all.

In the past I have run sims on all kinds of trading strategies using decades worth of historical data on thousands of stocks traded in the US. The only thing that remotely works is buy something that is going up. And seriously you don't have to get much more specific than that. Up for a week, a month, 5 years the returns are slightly higher. The r-squared is about 0.1 so unless you have a billion or so you will never outgain your transaction costs.

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All I can say, other than quit the nonsense, is only play around like this when you have a sufficient portfolio that losing whatever you are betting on TA won't affect you at all.

In the past I have run sims on all kinds of trading strategies using decades worth of historical data on thousands of stocks traded in the US. The only thing that remotely works is buy something that is going up. And seriously you don't have to get much more specific than that. Up for a week, a month, 5 years the returns are slightly higher. The r-squared is about 0.1 so unless you have a billion or so you will never outgain your transaction costs.

I'm gunna assume its Friday night and forgive you for this rambling. ;)

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I'm a fan of Alexander Elder, and use MACD histogram as a trend indicator on longer time frame charts before making decisions using other indicators on shorter charts. One powerful signal is a MACDH divergence from the price - for example if the price sets a new low, but the MACDH doesn't, then it's a pretty good sign of an impending bounce.

I've had a couple of minor successes when finding divergences on the weekly charts, but nothing I could retire on :)

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I've used it 3 times now for buying, and it hasn't let me down. :)

RSI is bothering me though. It often hovering at around 65 and maybe a little over 70, but I never know if this means stay away or not. Hard to judge.

Sometimes RSI has been over 70 and I know the share is NOT overbought, and can look at past prices where it was over 70 and the price subsequently went up to a new range.

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I have been monitoring Herencia Resources for some time now, and been using technical analysis to trade it successfully (I wish I could say it was for large sums of money!). It behaves very well from a MACD perspective despite its news-driven agenda. Check out its price history in relation to the MACD crossovers, RSI>80, and secondary crossovers of the upper Bollinger Bands (not the initial crosses, the ones at the end of a rise).

Strong sell signals imho, and am testing this theory with my hard-earned cash! If I'm wrong the price will leave me behind and I'll cry like a baby :angry:

b2e03e30c0c4eef52d8cf603f84bbdac.png

My pretty picture isn't showing :(

Edited by Fawkandles

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And here is CAZA, another share of mine that is very predictable from a technical perspective, apart from the last MACD crossover that tricked me lol. This one happening now should be the biggun!

b4a013a7d04a2b68b9c9a7a8920c6747.png

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