MACD signal line cross zero centerline

glebecki

Member
67 2
When the MACD's slower signal line crosses below zero, what does that signify? When the MACD's slower signal line crosses above zero, what does that signify?
 

timsk

Legendary member
7,348 2,140
Hi glebecki,
Quite a few members would give the same answer to both your questions - along the lines of 'nothing much'!

For a less cynical response and a good insight into how MACD works, along with how to use it, you could do worse than to look at these three videos - of which this is part 1: Technical Analysis Indicator MACD
Tim.
 
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Sigma-D

Established member
648 62
I'm not sure the zero line is as significant compared with the slope of the signal line, whether it is rising or falling, regardless of its location with respect to the zero line. I thought at one time the relationship between the signal and base was significant, but as with all indicators they can only lwt you know what has already happened.

I understand the humble moving average with respect to price has stood the test of time quite well, I must have a look at that myself one day.
 

Vicorka

Active member
246 7
When the MACD's slower signal line crosses below zero, what does that signify? When the MACD's slower signal line crosses above zero, what does that signify?

When MACD crosses zero it means that you have crossover of slow and fast MA that are used in calculation of MACD. This men that shorter-term trend described by fast MA is breaking below or above longer-term trend which by technical analysis would mean confirmation of a new trend. Does it guarantee future trend development in direction of a confirmed trend - NO. More about MACD
 

glebecki

Member
67 2
MACD signal line centerline cross

Hi glebecki,
Quite a few members would give the same answer to both your questions - along the lines of 'nothing much'!

For a less cynical response and a good insight into how MACD works, along with how to use it, you could do worse than to look at these three videos - of which this is part 1: Technical Analysis Indicator MACD
Tim.
Thank you, Tim. I chose your 'less cynical response' and studied the MACD videos you suggested that I view - Parts 1-3. They were very helpful. Can you suggest another source to help me figure out what to combine the MACD with to increase the robustness of the MACD signals mentioned in the videos? --george
 

glebecki

Member
67 2
When MACD crosses zero it means that you have crossover of slow and fast MA that are used in calculation of MACD. This men that shorter-term trend described by fast MA is breaking below or above longer-term trend which by technical analysis would mean confirmation of a new trend. Does it guarantee future trend development in direction of a confirmed trend - NO. More about MACD

Thank you, Vicorka. for your response. My question was about what the MACD signal line's crossing the zero center line signified. Your link to More about MACD was very helpful. --george
 

glebecki

Member
67 2
I'm not sure the zero line is as significant compared with the slope of the signal line, whether it is rising or falling, regardless of its location with respect to the zero line. I thought at one time the relationship between the signal and base was significant, but as with all indicators they can only lwt you know what has already happened.

I understand the humble moving average with respect to price has stood the test of time quite well, I must have a look at that myself one day.

Thank you, Sigma-D, for your helpful response. --glebecki
 

timsk

Legendary member
7,348 2,140
. . .Can you suggest another source to help me figure out what to combine the MACD with to increase the robustness of the MACD signals mentioned in the videos? --george
Hi George,
Technical analysis indicators fall into two groups: leading and lagging. These terms are often misunderstood in that critics of indicators will argue that all indicators are lagging - because they are calculated using historical prices and volume. Whilst their point is both valid and true - it does not mean that:
A. All indicators are useless, or that . . .
B. Within the discipline of technical analysis, that it is incorrect to describe one group of indicators as 'leading'. In other words, it is perfectly valid to describe certain indicators as 'leading'.
With reference to point B. - this article will make things a lot clearer: Introduction to Technical Indicators and Oscillators

Once you've read that, you will, hopefully, understand that MACD is a 'lagging' indicator and that there's . . .
A. Nothing wrong in that. Importantly, it doesn't make it less good than a leading indicator and that . . .
B. It's the best type of indicator to use in a trending market, i.e. if you want to use indicators at all, then a 'lagging' indicator is the best type to use in a trending market.

As to what to use in conjunction with MACD, I would suggest you look at a 'leading' indicator which will work well in a non-trending market, i.e. when it's range bound. The most popular are a sub group called oscillators, of which stochastics, CCI and RSI are the best known.

The anti-indicator lobby make very valid points about technical indicators in general and, certainly, all indicators are highly unlikely to 'work' in isolation and work consistently well over time. To use them judiciously is a skill on its own that will take time to acquire. As a starting point, if you've not yet seen it, take a look at this FAQ, paying particular attention to the section on indicators: Essentials Of Technical Analysis
Enjoy!
Tim.
 
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glebecki

Member
67 2
Intro to Technical Indicators and Oscillators

Hi George,
Technical analysis indicators fall into two groups: leading and lagging. These terms are often misunderstood in that critics of indicators will argue that all indicators are lagging - because they are calculated using historical prices and volume. Whilst their point is both valid and true - it does not mean that:
A. All indicators are useless, or that . . .
B. Within the discipline of technical analysis, that it is incorrect to describe one group of indicators as 'leading'. In other words, it is perfectly valid to describe certain indicators as 'leading'.
With reference to point B. - this article will make things a lot clearer: Introduction to Technical Indicators and Oscillators

Once you've read that, you will, hopefully, understand that MACD is a 'lagging' indicator and that there's . . .
A. Nothing wrong in that. Importantly, it doesn't make it less good than a leading indicator and that . . .
B. It's the best type of indicator to use in a trending market, i.e. if you want to use indicators at all, then a 'lagging' indicator is the best type to use in a trending market.

As to what to use in conjunction with MACD, I would suggest you look at a 'leading' indicator which will work well in a non-trending market, i.e. when it's range bound. The most popular are a sub group called oscillators, of which stochastics, CCI and RSI are the best known.

The anti-indicator lobby make very valid points about technical indicators in general and, certainly, all indicators are highly unlikely to 'work' in isolation and work consistently well over time. To use them judiciously is a skill on its own that will take time to acquire. As a starting point, if you've not yet seen it, take a look at this FAQ, paying particular attention to the section on indicators: Essentials Of Technical Analysis
Enjoy!
Tim.
Tim, I just finished reading your recommendation: Introduction to Technical Indicators and Oscillators. I read and studied the article and found the experience especially rewarding. Thanks to you, I feel I am growing in my understanding. I liked the concept of getting alignment among indicators before placing a trade: for example, positive divergence plus MACD bullish cross for confirmation, etc.
Thanks, --george
 
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glebecki

Member
67 2
Tim, I just finished reading your recommendation: Introduction to Technical Indicators and Oscillators. I read and studied the article and found the experience especially rewarding. Thanks to you, I feel I am growing in my understanding. I liked the concept of getting alignment among indicators before placing a trade: for example, positive divergence plus MACD bullish cross for confirmation, etc.
Thanks, --george

Wow! Tim. I just finished Essentials of Technical Analysis, the 2nd of your recommended readings. That is one sobering article. Sobering after getting somewhat boosted after the 1st assignment. Being somewhat scattered and overwhelmed by charts and attempts at deciphering TA, I welcome the advice to choose simplicity. I intuited that I need to trim complexity; it is really encouraging to see that in writing. Regarding Point #4 suggesting focus on price, please recommend a source for Point and Figure study. I just came across Jeremy du Plessis' book on P&F in a search. Do you know it? Recommend it?
Thanks, and take care, --george
 
 
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