I will have the REAL thing to work with next week but, while trying the demo I found out that many of the tool (MACD, Momentum, Moving Average, SAR, TRIX, etc...) are not well explained... or maybe I'm not smart enough. Whatever. I'm willing to learn from whoever can explained in simple words what are these things for and why I should or shouldn't used them
Old Mullet, if you read this, I know you refer often to MACD. I would greatly appreciate your input on this subject in particular.
To give you a bit of my profile, I used to be a long term above 1 dollar shares investor and now switching to day (or week) trading on micro-pennies. ¨This is much more fun.
Thanks to all. I read with great pleasure your posts.
Not a tech guru but have done pretty good with only charts and tech analysis.
I can comment on MACD.
MACD basically is a trend following tool. It is not a leading indicator by itself but is very useful when used with other MA's, Stochastics and others. The basic rule is to sell when the MACD (difference of 26 day and 12 day EMA)falls below its signal line (9 day EMA) and to buy when it rises above the same. Many buy and sell as the MACD rises or falls above/below zero. I prefer to watch for crossovers. This usually indicates a turn in the current trend. You would do better to use it in conjunction with the Stochastic Indicator (a leading indicator)IMO. Overbought/Oversold conditions can be determined when the shorter MA pulls dramatically away from the longer MA but this can vary from stock to stock. Divergences can indicate a trend reversal. When the MACD is moving in one direction and the stock price is moving opposite it tends to indicate that a trend will reverse, this is more significant if a stock is overbought/oversold. Although the MACD is a following indicator it can be very useful in keeping you on the right side of the market. You sacrifice early signals but tend to make safer investments.
Hope this helps. Would like to hear other opinions. Wish you good trading. Wyznrich
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Wyznrich Thanks easy to understand explanation on MACD,I also notice those crossovers and study what happens there, your explanation made it a lot clearer to me. Now, maybe you or somebody else can tell me what in the world is DMI + DMI- and ADX? have no clue did not find anything about it thanks for the help Ed SOONER OR LATER I WILL LEARN
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Thanks Wyznrich I was also wondering this. Many sources do not explain it very well. I guess I now have a general idea how it is used or followed, but still don't feel I have a complete understanding.
I know they have the formulas for this stuff MACD (difference of 26 day and 12 day EMA)falls below its signal line (9 day EMA) but I find it difficult to see how they come up with it. Wish I could get a more detailed understanding. I went to this investopedia.com website and learned a lot, but some stuff still seemed very vague. I still never got to study bollinger bands. I will have to check those out next. They look even more mysterious to me. Hey good question Malloy These charting techniques seem like valuable too know.
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Did not look at chart you referenced but went to Big Charts. This is not a typical situation. There has been a massive accumulation of stock, a recent new high and a first retracement (which is buyable nearly 100% of the time) The buy point by strict chart interpretation was monday. Stock had a four bar consecutive high drop, Stochastic had crossover (though not ideal) and MACD was bottoming out, and monday bar surpassed previous bar high which was a narrow band with bullish signal (long bottoming tail). It may be too late to enter now. I believe the stock could rise tomorrow and then retreat unless it breaks resistance of .08. Should it break .08 there is no limit. The MACD is positive with a crossover but I believe the stock is overbought and the topping tail and stochastic croosover down past 80 is typically interpreted as a sell signal. It is all contingent on volume. Remember we do not trade stocks, we trade people. We try to buy from the fearful and sell to the greedy. I hope all goes well for all in now, I missed this one being new to pennies. I would not get in without close watch of daily movement and volume. This is only one opinion, I am sure there are many more.
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Glad to help. There are lots of good books on tech analysis. Probably as many interpretations as there are books. MACD was developed by Gerald Appel. One good book I found when I started was Technical Analysis from A to Z (ACHELIS) published by McGraw Hill. Lot of info. Hope you do well.
I'm still learning, but here are my notes for MACD so far
MACD - displays moving averages of price Two lines usually blue and red
The blue line shows 26 days of the moving average with the last 12 days subtracted. It is showing an overall longer range average.
The red line shows the 9 day moving average It is showing a quicker short range average.
When the lines cross it means that the shorter average has quickened or slowed over the long range average. When they cross it is either a time to buy or sell depending on the direction.
However MACD only shows the current trends, and is not meant to predict future direction.
[This message has been edited by DoubleAdvantage (edited January 29, 2004).]
I will post another chart later to see how we compared the 2 (check above for the first one). I learn faster with visual.
Old Mullet, cabbage22, dardadog, realityinc21, Purl Gurl, offshoretrader...and many more. I hope to hear from you. Your experience is valuable to me...I always have pleasure reading your post.
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