In one of its simplest forms, the moving average convergence/divergence (MACD) indicator can be a powerful stock market strategy that uses technical analysis. A moving average is the average of a price over the last X units of time. For example, an online stock trading strategy might use a thirty minute moving average: the moving average at time T is the average of the last thirty minutes of prices. If we take the actual price at time T (which is not necessarily the same as the moving average at T) and subtract the moving average, we have the MACD.
Intuitively, this online trading strategy says that when the MACD gets to a large positive or negative value, the stock is likely overbought or oversold, respectively. So a large positive MACD might mean that stock XYZ is going to go down in price. Likewise, a large negative divergence might mean the stock is likely to rise.
There are an infinite number of online stock trading strategies that can rely on technical analysis because you are limited only by your imagination and knowledge of mathematics.
No comments:
Post a Comment