Continue reading...Let’s take a trip off the beaten path. We’ll administer some necessary medicine to a revered technical indicator – the moving average convergence divergence (MACD). Enough articles have been written about the MACD to depopulate half the world’s rain forests, but little has been said about the downsides of using this very popular tool. In short, the MACD doesn’t work as well as some say it does. It’s a glorified moving average, and it’s weak at forecasting price direction. In this article we’ll cover the controversial perspective of those who spurn the use of this prevalent indicator and what can be used in its place
The MACD’s SeductionWhen applied over a long time frame, the signals generated by a given moving average will often seem very random, but a moving average can be a seductive indicator. An exponential moving average is just advanced enough to entice the delight of the technically-minded, but is not so arcane as to perplex the rest of us.
And although anyone could...
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