{"id":139889,"date":"2025-03-17T15:36:56","date_gmt":"2025-03-17T15:36:56","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/investing\/moving-average-convergence-divergence-indicator-macd\/"},"modified":"2025-03-17T15:36:56","modified_gmt":"2025-03-17T15:36:56","slug":"moving-average-convergence-divergence-indicator-macd","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=139889","title":{"rendered":"Moving Average Convergence\/Divergence Indicator (MACD)"},"content":{"rendered":"


\n<\/p>\n

\n
\"Moving<\/p>\n

Wheeler \u2013 Oregon Coast<\/em><\/p>\n<\/div>\n

Back in the 1970s I learned of Gerald Appel<\/a><\/strong><\/em><\/span> and his Moving Average Convergence Divergence (MACD) technical indicator.\u00a0 Appel published and sold a pamphlet explaining the MACD model and how to calculate it on a Texas Instrument calculator.\u00a0 This was a time just before personal computers became available so we relied on calculators for \u201ccomplex\u201d calculations.\u00a0 Some of you will remember the days of programmable calculators.\u00a0 At the time I was tracking no-load mutual funds using Exponential Moving Averages<\/a><\/strong><\/em><\/span> (EMAs).\u00a0 EMAs were easier to calculate than simple moving averages as one did not need to remove the oldest data point.\u00a0 Furthermore, EMAs place more emphasis on recent data vs. old data points so they are faster reacting to price changes.<\/p>\n

Appel used various EMA combinations, but the default setting today is to use a 12-day and 26-day combination with a 9-day EMA of the MACD.\u00a0 Stockcharts now makes all the calculations for the end user so there is no need to manually go through all the calculations.<\/p>\n

Stockchart Graphs:\u00a0\u00a0<\/strong>Save this link <\/strong><\/em><\/span><\/a>so you have an easy time finding an appropriate Stockchart graph for any ticker of interest.\u00a0 A little later I will go over some of the positives and negatives of using this technical indicator.<\/p>\n

MACD: <\/strong>Below is the MACD plot for SCHD, one ETF used with ITA portfolios.\u00a0 The black or dark line is a calculation of the 26-day EMA minus the 12-day EMA.\u00a0 The red line is a 9-day EMA of the MACD graph.\u00a0 Again, Stockcharts does all the grunt work for the end user.<\/p>\n

The argument goes like this.\u00a0 When the black line moves from below to above the red line we purchase shares in the security and when the black line moves from above to below the red line we sell all shares of the security.\u00a0 The current MACD recommendation for SCHD is to remain in cash and wait for a positive signal.<\/p>\n

As with most technical indicators there are at least three fundamental negatives to the MACD.<\/p>\n