MACD is one of my main indicators. I use it, as others, in conjunction with other stuff. I use it on 5 and 15 minute charts as a direction indicator, but use traditional chart patterns to actually plan the trade. When the 5 and 15 line up, I am much more comfy in my trading. Jay
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Hmmmm...never thought about it that way. I don't know if MACD and Stochastics fall into the same category, but this is how George Lane (considered by many to be "THE" authority on stochastics) explains it in his seminar manual. "When a stock or commodity has made a high, then reacts, and subsequently goes to a higher high, while the corresponding peaks on %D make a high and then a lower high, a bearish divergence is indicated. Conversely, when a stock or commodity has made a low, then rallies and subsequently moves down to a lower low, while the corresponding low points of %D have made a low and then a higher low, you have a bullish convergence." I'm not saying you're wrong and he's right, I just thought you might appreciate another qualified opinion. I like to use the 3-10-1 Macd on a 133T chart.
Well, I don't mean to offend you partner, but that's not a divergence on the chart. Notice, the two purple lines. If drawn to infinity, the two lines will converge, not diverge.
Break down the MACD formula....actually look at how it is derived...and understand it...... if you REALLY understand it...then you will be able to look at a price chart and draw a fairly accurate MACD by freehand..... if you can do that then you are starting to understand price and how it moves... remember MACD, stochastics, RSI....they are ALL a DERIVATIVE of price.....the original series always shows its colors before the derivative......a derivative just simplifies things for the guys who don't understand the original series.
If drawn to infinity, the two lines will cross and cross and cross.... It is still a divergence for me and the fact that the share goes up is not the proof of course.
I don't know how you figure the lines will cross and cross and cross, and I never said that the proof was because the price went up. I'm just trying to help out here. George Lane has been in this business since the early 50's. He's been trading for 50 years He was a floor broker for 10 years He was a member of 3 exchanges He's trained thousands of brokers and market analysts Some people even say he invented the damn indicator He's given lectures for Dow-Jones Tag seminars, Futures magazine conferences, The Market Technicians Assoc, Association for Technical Analysis, Technical Securities Analysts Assoc, The Canadian Society of Technical Analysts, etc Now, I'm not trying to put you down or anything. I'm just trying to help you see that you may not be right. Hope this helps...
Breakout you are right about Lane's definition. Appel, the designer of the MACD, uses the terms negative divergence and positive divergence, and he also uses the terms bearish divergence and bullish divergence. Perhaps because his indicator also references convergence and divergence , too much of the same names referring to different ideas was more than he could bare. Of course, "a rose by any other name ...." Thanks for the heads up on Lane, Breakout.