Lecture on MACD Indicator

I just rounded up to $5,000. I made about $5,000 this morning trading Amazon. Hey, what's up YouTube? This is Foxtel Digital coming to you again with Black Girl Stocks. And in this video, we're going to be talking about the most popular indicator used on stock charts, and that's the MACD indicator. So we're going to go over what the MACD indicator is, advantages and disadvantages, and then two strategies that you can start today. Okay? So this is definitely a must have for day trading because it's very quick at picking up short-term changes in the stock trend. So this is critical to master this tool. But first, if this is your first time watching this video, please make sure you click that thumbs up button. Also, subscribe and click that notification bell so that you get notified anytime I upload a new video for you guys. What? What is the MACD indicator? So really it's a simple trading indicator that can provide amazing signals. All right, so that's one of the main advantages of using the MACD indicator. It provides much faster information compared to using average indicators like RSI or moving averages. MACD is short for moving average convergence divergence. We're going to talk about that a little bit later. So the top three things that the MACD is best known for, showing the direction of the stock's trend. giving potential reversal points. So letting you know ahead of time when you might have a possible reversal in that trend. And then to also give the momentum of price movement. So if you're into trading trends, then the MACD indicator is gonna be your go-to. The MACD indicator is made up of three different parts. All right, so. you see here you have the blue and that's known as the magd line and this just plots the differences between the fast moving average and the slow moving average so there's going to be two different moving averages all calculated into this one line okay all right so this is what it's going to look like and then by default when you add this indicator to your chart it automatically comes set with the 12 and 26 period ema moving averages all right you have your 12 for your fast your slow is going to be 26 and these are all going to be based on the previous closed prices then next you have your signal line so that's going to be this red and the signal line is going to show you changes in the price momentum so the signal line is going to be the nine period ema but this is going to be a nine period ema of the macd line so it's an average of averages if that makes sense bear with me so the signal line is the nine period EMA of the actual MACD line points or an average of the last nine values from our MACD line so you can find the momentum strength by looking at the distance between the MACD and the signal lines so you see here we have our blue MACD line and our red signal When there's more distance in between it, you see that we have more price movement. But then look at this area here where it's a little bit tighter. When we actually have this crossover, there's not a lot of price movement there, at least not as much as we have where there's more distance. So that's going to give you the momentum or the strength of that trend at that time. You're going to know you're in a strong trend when the two lines are moving further apart. And then a weak trend is going to be when the two lines are moving closer together, which is also an indication of a possible reversal. So below our MACD and signal line is going to be our histogram. Okay. And this is going to be this, you know, these green and red bars down here. So the further the distance is between your lines, the higher the momentum, and then the higher your histogram value is going to be. Also note that green is going to be positive for upwards. and red is going to be negative for down. I think you already knew that though. All right, and the last thing that we're going to talk about is the center line here. So we have a center line. You see this zero value. All right, so that's going to be your center line. So you can get a good idea of upward or downward movement when you look at the position of your MACD line compared to the baseline at zero. So when the MACD moves above the baseline, then it's going to be labeled as bullish movement but when the macd moves below the baseline it's going to signal potential bearish movement now right now we're in the one minute chart because i've been day trading a lot so we're just going to use this for it for example so you see here for the most part of the day apple has somewhat been down trending and you see that it is trading below for the most part below the um the central line here and then you'll also notice when we had this larger dip the macd line is trading below the center line so that is a good indication of bearish movement or a downtrend okay so let's talk about these strategies and what you can do to use the macd indicator to your advantage the first method is going to be trend trading so that's the trend trading method so in this method it's going to be very easy and i feel like we talk about this all the time but never the less finding the trend is gonna be one of the most important steps every technical trader needs to take and it's so easy and it only has three simple steps first you're gonna want to find the stocks trend and one easy way to do this is by using the 200 period moving average on your chart. So let's go ahead and add that. With this information, when you're looking for entry points, use the 200 moving average to determine whether the prices are consistently trading above the average range. So when the stock is consistently trading above the 200 moving average, we're in an uptrend. But if it's trading below, we're in a downtrend. And so we'll just look at this for an example. This is definitely a downtrend on... the 14th at around is that 237 okay but yeah that's giving me complete downtrend but then all of a sudden boom when we moved into our uptrend very briefly at around so this was a downtrend for a while all the way up until the stock just broke above that 200 moving average and then we had a price increase from 147 all the way up to 149. so it's not huge but this did happen today so this is a one minute chart but that's just how you can use the 200 moving average 200 day or 200 period moving average to catch your trend the next thing that you're going to do is look for macd crossovers and these are going to give you opportunities in the direction of your trend you're going to look for crossovers in the macd indicator and when we say crossovers we mean crossovers like boom okay so you see right here the blue macd is on top price is going up boom as soon as you saw that crossover that red signal started to trade above the price drop get out of there let's go a little bit further you see the stock is dropping here crossover boom drop but then at the next crossover boom is going up again so that and this is all intraday so that would get you from 147 up to 148 that would be a dollar so these are quick movements and then you'll see where there's not a lot of distance there the price was still kind of trading in a range but it didn't drop and then again it is trading above the 200 moving average so that's another great indicator that you would know to stay in there you get all the way up there boom you saw that crossover jump ship although you did lose some of the profit you would not lose nearly as much as if you held this all the way down through this fall off and the last step is going to be to use the macd zero line to manage your risk so when you're trading trends the most important thing to know it will eventually come to an end so in an uptrend when there's a bearish crossover and a bearish crossover that just means when you're uh like signaling a bearish move so when your blue macd crosses over your signal then this could be an indication that you're going into a downtrend but not all the time so you see here we still had some crossovers but the stock was still moving upwards so how would you know that we have definitely entered into a downtrend so when you see a crossover That doesn't always mean that you're changing directions immediately. It could just mean that that uptrend is slowing down, but it still was moving upwards. If you're in a long position, you could have opted out to get out of that trade at the first MACD crossover, but that could just be a temporary pullback. And that's going to happen a lot of time with volatile stocks. So when you do see a bearish crossover, check and look at the center line with your MACD indicator. Now, when you see that you're... MACD has crossed below your zero midpoint of your MACD indicator, then you have officially transitioned into a downtrend. But yeah, it officially hit that downtrend around this area. So if it crosses above it, then you could be going into an uptrend. Well, it wasn't trading below it, but it was trading, you know, pretty close to the center line. And then as soon as we really made some movement above that, then we went into an uptrend. So that was just a good signal for that. And then the next strategy is going to be the weakening trend method. So it's going to be similar to what we were looking at, but we're going to be looking for weaknesses in a current trend so that we'll know to get in quick. This is going to give you an... early entry signal and it's going to get you some good profits so a good way to identify changes in the stock's trend is with macd divergence i told you we were going to talk about that and so we've talked about divergence before with our rsi indicator and if you haven't watched that make sure you check out that video too i'll leave that in the link below but divergence normally happens when the indicator is moving in a different direction than the stock price all right now i'm going to change the stock and i'm going to give you an example of what i was day trading this morning so i just rounded up to five thousand i made about five thousand dollars this morning uh trading amazon and one thing i noticed was this uh this right here yeah i started to notice this divergence starting to develop so the stock price is dropping but the magni indicator is going up so that just kind of made me feel that it was going to have a quick you know a quick little pullback and i did a call really quickly and then i got out of that of course because it still was trending down i was trading below the the 200 moving average for the day so but that was just you know a good indication to me that it was slowing down for that period of time and it wasn't dropping as much as it was so you see right here it's kind of started to level off you know it is trading sideways and you know kind of trying to come back up but it's not dropping as much as it was so Like I said, this is definitely going to let you know when the stock is slowing down its movement and it's about to change or go sideways or do something different than what it's doing right now. So that's how you can use the MACD indicator. Check out this video on how to find good stocks to trade using Thinkorswim's stock screener. So you'll definitely find the best plays here. This is how you find your stocks. Right there. Click that. Yeah.

I just rounded up to $5,000. I made about $5,000 this morning trading Amazon. Hey, what's up YouTube? This is Foxtel Digital coming to you again with Black Girl Stocks.

And in this video, we're going to be talking about the most popular indicator used on stock charts, and that's the MACD indicator. So we're going to go over what the MACD indicator is, advantages and disadvantages, and then two strategies that you can start today. Okay?

So this is definitely a must have for day trading because it's very quick at picking up short-term changes in the stock trend. So this is critical to master this tool. But first, if this is your first time watching this video, please make sure you click that thumbs up button.

Also, subscribe and click that notification bell so that you get notified anytime I upload a new video for you guys. What? What is the MACD indicator?

So really it's a simple trading indicator that can provide amazing signals. All right, so that's one of the main advantages of using the MACD indicator. It provides much faster information compared to using average indicators like RSI or moving averages. MACD is short for moving average convergence divergence.

We're going to talk about that a little bit later. So the top three things that the MACD is best known for, showing the direction of the stock's trend. giving potential reversal points. So letting you know ahead of time when you might have a possible reversal in that trend.

And then to also give the momentum of price movement. So if you're into trading trends, then the MACD indicator is gonna be your go-to. The MACD indicator is made up of three different parts.

All right, so. you see here you have the blue and that's known as the magd line and this just plots the differences between the fast moving average and the slow moving average so there's going to be two different moving averages all calculated into this one line okay all right so this is what it's going to look like and then by default when you add this indicator to your chart it automatically comes set with the 12 and 26 period ema moving averages all right you have your 12 for your fast your slow is going to be 26 and these are all going to be based on the previous closed prices then next you have your signal line so that's going to be this red and the signal line is going to show you changes in the price momentum so the signal line is going to be the nine period ema but this is going to be a nine period ema of the macd line so it's an average of averages if that makes sense bear with me so the signal line is the nine period EMA of the actual MACD line points or an average of the last nine values from our MACD line so you can find the momentum strength by looking at the distance between the MACD and the signal lines so you see here we have our blue MACD line and our red signal When there's more distance in between it, you see that we have more price movement. But then look at this area here where it's a little bit tighter. When we actually have this crossover, there's not a lot of price movement there, at least not as much as we have where there's more distance. So that's going to give you the momentum or the strength of that trend at that time.

You're going to know you're in a strong trend when the two lines are moving further apart. And then a weak trend is going to be when the two lines are moving closer together, which is also an indication of a possible reversal. So below our MACD and signal line is going to be our histogram.

Okay. And this is going to be this, you know, these green and red bars down here. So the further the distance is between your lines, the higher the momentum, and then the higher your histogram value is going to be. Also note that green is going to be positive for upwards.

and red is going to be negative for down. I think you already knew that though. All right, and the last thing that we're going to talk about is the center line here. So we have a center line.

You see this zero value. All right, so that's going to be your center line. So you can get a good idea of upward or downward movement when you look at the position of your MACD line compared to the baseline at zero. So when the MACD moves above the baseline, then it's going to be labeled as bullish movement but when the macd moves below the baseline it's going to signal potential bearish movement now right now we're in the one minute chart because i've been day trading a lot so we're just going to use this for it for example so you see here for the most part of the day apple has somewhat been down trending and you see that it is trading below for the most part below the um the central line here and then you'll also notice when we had this larger dip the macd line is trading below the center line so that is a good indication of bearish movement or a downtrend okay so let's talk about these strategies and what you can do to use the macd indicator to your advantage the first method is going to be trend trading so that's the trend trading method so in this method it's going to be very easy and i feel like we talk about this all the time but never the less finding the trend is gonna be one of the most important steps every technical trader needs to take and it's so easy and it only has three simple steps first you're gonna want to find the stocks trend and one easy way to do this is by using the 200 period moving average on your chart. So let's go ahead and add that.

With this information, when you're looking for entry points, use the 200 moving average to determine whether the prices are consistently trading above the average range. So when the stock is consistently trading above the 200 moving average, we're in an uptrend. But if it's trading below, we're in a downtrend. And so we'll just look at this for an example. This is definitely a downtrend on...

the 14th at around is that 237 okay but yeah that's giving me complete downtrend but then all of a sudden boom when we moved into our uptrend very briefly at around so this was a downtrend for a while all the way up until the stock just broke above that 200 moving average and then we had a price increase from 147 all the way up to 149. so it's not huge but this did happen today so this is a one minute chart but that's just how you can use the 200 moving average 200 day or 200 period moving average to catch your trend the next thing that you're going to do is look for macd crossovers and these are going to give you opportunities in the direction of your trend you're going to look for crossovers in the macd indicator and when we say crossovers we mean crossovers like boom okay so you see right here the blue macd is on top price is going up boom as soon as you saw that crossover that red signal started to trade above the price drop get out of there let's go a little bit further you see the stock is dropping here crossover boom drop but then at the next crossover boom is going up again so that and this is all intraday so that would get you from 147 up to 148 that would be a dollar so these are quick movements and then you'll see where there's not a lot of distance there the price was still kind of trading in a range but it didn't drop and then again it is trading above the 200 moving average so that's another great indicator that you would know to stay in there you get all the way up there boom you saw that crossover jump ship although you did lose some of the profit you would not lose nearly as much as if you held this all the way down through this fall off and the last step is going to be to use the macd zero line to manage your risk so when you're trading trends the most important thing to know it will eventually come to an end so in an uptrend when there's a bearish crossover and a bearish crossover that just means when you're uh like signaling a bearish move so when your blue macd crosses over your signal then this could be an indication that you're going into a downtrend but not all the time so you see here we still had some crossovers but the stock was still moving upwards so how would you know that we have definitely entered into a downtrend so when you see a crossover That doesn't always mean that you're changing directions immediately. It could just mean that that uptrend is slowing down, but it still was moving upwards. If you're in a long position, you could have opted out to get out of that trade at the first MACD crossover, but that could just be a temporary pullback. And that's going to happen a lot of time with volatile stocks. So when you do see a bearish crossover, check and look at the center line with your MACD indicator.

Now, when you see that you're... MACD has crossed below your zero midpoint of your MACD indicator, then you have officially transitioned into a downtrend. But yeah, it officially hit that downtrend around this area. So if it crosses above it, then you could be going into an uptrend. Well, it wasn't trading below it, but it was trading, you know, pretty close to the center line.

And then as soon as we really made some movement above that, then we went into an uptrend. So that was just a good signal for that. And then the next strategy is going to be the weakening trend method. So it's going to be similar to what we were looking at, but we're going to be looking for weaknesses in a current trend so that we'll know to get in quick.

This is going to give you an... early entry signal and it's going to get you some good profits so a good way to identify changes in the stock's trend is with macd divergence i told you we were going to talk about that and so we've talked about divergence before with our rsi indicator and if you haven't watched that make sure you check out that video too i'll leave that in the link below but divergence normally happens when the indicator is moving in a different direction than the stock price all right now i'm going to change the stock and i'm going to give you an example of what i was day trading this morning so i just rounded up to five thousand i made about five thousand dollars this morning uh trading amazon and one thing i noticed was this uh this right here yeah i started to notice this divergence starting to develop so the stock price is dropping but the magni indicator is going up so that just kind of made me feel that it was going to have a quick you know a quick little pullback and i did a call really quickly and then i got out of that of course because it still was trending down i was trading below the the 200 moving average for the day so but that was just you know a good indication to me that it was slowing down for that period of time and it wasn't dropping as much as it was so you see right here it's kind of started to level off you know it is trading sideways and you know kind of trying to come back up but it's not dropping as much as it was so Like I said, this is definitely going to let you know when the stock is slowing down its movement and it's about to change or go sideways or do something different than what it's doing right now. So that's how you can use the MACD indicator.

Check out this video on how to find good stocks to trade using Thinkorswim's stock screener. So you'll definitely find the best plays here. This is how you find your stocks. Right there. Click that.

Yeah.

Transcript for:Lecture on MACD Indicator

Transcript for:
Lecture on MACD Indicator