What is MACD in Technical Analysis?: Moving Average Convergence Divergence (MACD) is a very popular trend following indicator and used in technical analysis. Its also called as Mac-Dee. It is developed by Gerald Appel in the late seventies. MACD is one type of oscillator indicator which is used by traders and analyst to gauge the momentum of stocks.

Why MACD is so informative and popular? Because it is a combination of two different types of indicators. First one is, MACD consists of two moving averages of varying lengths (Moving Averages are lagging Indicator) which helps to identify the trend, direction, and duration. The second part of MACD is the histogram which oscillates above and below a center zero Line which indicates security’s momentum. In this article we will learn about what is MACD and How does it work?

What is MACD [Key Notes] :

• MACD is calculated by subtracting EMA of 26 periods from the EMA of 12 periods.
• MACD gives signals when it crosses above (for buy) or below (for sell).
• Not only for buy and sell, but cross over is also used as a signal of overbought and oversold.
• MACD also helps a trader to understand whether the bullish or bearish movement of the stock price is strengthening or weakening.

How MACD works

The MACD indicator is consist of three elements which are MACD line, Signal line, and the MACD histogram.

• The MACD line: It helps to determine the market trend, i.e. upward or downward momentum.
• The Signal line: which is an EMA of the MACD line (9-period EMA) with the MACD line may be helpful to identify potential reversal or to find out entry and exit points.
• Histogram: A graphical representation of the divergence and convergence of the MACD line and the signal line.

# The MACD Line:

The exponential moving average is measured according to the closing price of a stock and the periods used to calculate the two EMAs are usually set as 12 periods (Faster) and 26 periods (Slower).

With different time frame (minutes, hours, days, weeks, months) the periods may be configured, but in this blog, we will discuss daily setting only. These parameters can be changed as per the different trading strategies.

MACD = 12-day EMA – 26-day EMA

“Invest in yourself. Your career is the engine of your wealth.” – Paul Clitheroe

# The Signal lines

The signal line is calculated from a 9-day EMA of the main line and as such provider further insights about its previous movements.

Signal Line = 9-day EMA of MACD Line

When the MACD line and Signal line crossover, it indicates trend reversal signals.

# The MACD histogram

The histogram is a visual record of the relative movements of the MACD line and the signal. It is simply calculated by the given formula:

MACD histogram = MACD Line – Signal Line

⇒ MACD Setting:

The default setting for MACD is based on (12,26,9) period EMAs. However, traders and technical analyst change default parameters as per their strategies for a different time frame. For example, with a longer time frame such as weekly or monthly charts – MACD (5,35,5) is one of the settings used by long term traders.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Phillip Fisher “

Centreline Crossovers

Centreline crossover occurs when the MACD line moves either on the positive or negative area.

When it crosses above the centreline, the positive MACD value indicates that,

the 12-day EMA > 26-day EMA.

A negative MACD is shown when the MACD line cross below the centreline which indicates that,

26-day EMA > 12-day EMA

A positive MACD line indicates a stronger upside trend or momentum, where a negative MACD line indicates a negative momentum.

Signal Line Crossover

Crossover of MACD line and Signal line helps a trader to interpret buying or selling opportunity. Traders find buying opportunity when the MACD line crosses above the signal line, and when MACD line crosses below the signal line, traders interpret it as selling opportunity. It is not always reliable, to use the signal line and MACD line crossover.

“Know what you own, and know why you own it.” – Peter Lynch

MACD Indicator Strategy :

MACD is about the divergence and convergence of the two moving averages. Divergence occurs when the moving average goes away from each other and convergence occurs when the moving averages come towards each other.

The 26-day moving average is slower and lesser reactive to a price change as compared to 12 – day moving average which is faster and plays a major role for the most movements of MACD.

The MACD line Oscillates above and below the center line (zero lines), and the direction is depending on depends on the direction of the moving average cross.

The divergence forms when the MACD divergence from the price action of the stock. A bullish divergence forms when a stock forms lower low and the MACD forms a higher low.

The bearish divergence forms when a stock forms higher high and the MACD forms a lower high.

Conclusion:

The MACD indicator is one of the special indicators because it together includes momentum and trend. This unique mix of momentum and trend can be applied to a minute, daily, weekly or monthly charts with different parameters. The default parameter is MACD (12,26,9). The MACD is not suitable for identifying the overbought and oversold level of security.

By, Virtueticks

Technical Analysis Software India: Research and knowledge are not the most useful tools in the stock market which will provide you the upper hand; you would need powerful best technical analysis software that would assist you in every step. Most of the stock trader utilizes the analysis software when they are planning to make a move by selling or buying stocks.

When you tie up with a broker farm, you will find that they will offer some free or paid analysis software which will provide a varied amount of research, trade report, analysis function, etc. Most of the best technical analysis software used by expert traders is equipped with different amount of features which include trade automation, alert trait, news, a technical indicator, fundamental study and much more.

However, it is not easy to choose the useful ones from bunch available on the internet, but if you go through this article, you will find the names of six best technical analysis software India. All the top software is highly rated by experts mostly because of their functionality and features.

6 Best Technical Analysis Software for 2020

Using the technical analysis software during share trading serves as the smartest way to analyze the market condition of a particular share. Here is the list of some useful and dominant technical software in the market:

#1 MetaStock Trader

If you are planning to opt for highly functional software that will assist you in every way then MetaStock is a viable option. This software provides features like technical indicators more than 300, news, data with filtering and screening feasibility, drawing tool, etc. It analyzes data from various areas spread across the world.

#2 eSignal

eSignal is well-known software among trader and it mainly because of the array of the features offered in various packages. This software has a global reach, and it provides analysis of derivatives, stocks, bonds, Forex, and fund. Apart from these features, it also provides news, fundamental figure, alert capability, back-testing, technical indicators, etc.

#3 Ninja Trader

This is widely popular best technical analysis software where you can enjoy order entry, third-party library integration facility, execution with personalized development choice and various other crucial features. Ninja trader even offers more than 100 technical indicators, risk-free trade coaching tutorials, trade simulators, etc.

#4 Wave59 Pro

If you are an experienced expert trader then this would ideal for you because it provides many advanced features like AI module, Fibonacci Vortex, Gann-based tools, etc. You will also enjoy features like integrated order execution, system testing, neural network, training feature, etc.

#5 ProfitSource Platform

The ProfitSource platform is suitable for highly active traders in the share market as it provides automated technical indicators, Elliot Wave analysis, back-testing feature and much more. This software covers all type of asset class whether it is options or equities.

#6 VectorVest

Vector Vest provides some high functional packages in India, and most important feature of these packages is that it provides best intraday indicator for various prime funds and stocks. You can even enjoy features real-time filtering, charting function, personalization, back-testing, etc.

Best Technical Analysis Trading Software for 2020 By, Virtueticks

Technical analysis tool serves as a crucial instrument in share market as it quickly solves a lot of complex tasks thus assisting in accomplishing your goal. Nowadays everyone is quite enthusiastic about investing in the stock exchange, but for newcomers, it is a tough job to monitor every movement in the stock market. So in those technical analysis tools comes handy which provides the movement of particular stock in the market.

However, it is tough to choose technical analysis tool from massive availability on the internet, and as an amateur, you will get fumbled while choosing a particular one. Every tool has pro and cons like you will find some tools easy to operate while some tools would go over your head. Everyone loves to use to tools that are easy to handle, clean and possess specialized scalability which will help them in buying and selling of stock.

Top 5 Technical Analysis Tools

If you are planning to invest in the stock market but couldn’t figure out where to spend, then you can take help from technical analysis tool. The following points will depict the name of five technical analysis tools that would suit your need:

1. Simple Moving Average

Simple moving average is a widely popular stock market tool, and many users use this instrument for three time period which are 20, 50 and 200 days. This tool shows you the average of the old N number of days which is highly needed. Apart from selling or buying stocks, you can even use this for support or resistance.

2. Stock Charts

The Stock charts are one of the cleanest and useful tools in the market. You can easily use this tool because it has a clear interface and many experts use this website for its effective result. Stock charts provide various type of free tools to its users, and it has benefited many people when they are about to buy new stock.

3. Relative Strength Index

Relative Strength Index is not a simple tool and it useful for traders who can easily understand complex math problems. This tool provides you a chart of comparison result which is calculated from the comparison between profit and loss. Many experts highly applaud this tool because it provides you a reliable result which helps traders to make final decisions.

4. MACD

Moving Average Convergence and Divergence or MACD is a well-known technical analysis tool, and it provides an efficient result. Although it shares some similarity with SMA but MACD’s indicator provides a different result that comes handy in a different situation. Based on the result you can easily understand when to buy or sell the intended stock.

5. Parabolic SAR

Parabolic SAR is designed for stock experts who can understand complex calculation, but you can also use this tool after you gather some experience. This is a powerful stock analysis tool which is used all over the world, and its popularity is growing day by day. This tool works well with stock that provides clear tendency when they are analyzed.

By, Virtueticks