macd indicator explained and the strategy shown on how to make money with that so let's Jump Right In and most people trade this incorrectly like the trade most indicators which is why most people don't think indicators work I'm here to tell you indicators always work and indicators are never wrong how's that for a uh started with a controversy so the way most people read indicators macd or any other indicator is they just say oh okay if the lines of the indicator going up then we should buy and that works sometimes and it does not work most of the time and then people come to the conclusion oh indicators don't work uh that is wrong first of all they always work and the problem is most people don't even know what an indicator is so let's get really controversial here but these lines here this is not the indicator that is not the indicator but Barry it says right there macd isn't that the macd indicator no it is not let me show you what the indicator really is so we can do this by just pulling up here we've got trading View and let me grab the thing there there you go all right so that my friends is the indicator that's the real indicator indicators are math functions and they are not the lines on your chart the lines are the plotting of this math function and if you're going to be a professional Trader you've got to go beyond what the average person does most people are just watching at the line I think that means something it does mean something the problem is they don't know what it means now I'm not saying that you got to go in and learn all this coding or that you have to learn to be uh you know PhD in mathematics from MIT I'm certainly not in fact math was my very worst subject in school but you do need to understand what it means and that's what I'm here to share with you today so that you can trade it effectively so let's go in and let me explain to you what it actually means macd stands for moving average convergence Divergence mecd people sometimes just call it macd and I guess that's fine but macd's faster to say and that's what it stands for ma stands for moving average and C convergence D Divergence I'm going to simplify this down to its Rost form in fact we're going to do two videos we're going to do two parts on this because we really need to break it down so I'm going to take off everything except for the actual macd line right now there's your macd line I've left that on and I've also plotted two moving averages here so I want you to see what these are first of all we've got these are EMAs and this one is a 12 period exponential moving average this one's also an exponential moving average and this one is a 26 period moving average and that's because when we go into the macd you'll see that these are the traditional lengths 12 and 26. fast length slow length so this one line this one because I've got to call it blue line all that is measuring is whether these two moving averages the 12 and the 26 exponential are converging together or diverging away from each other moving average convergence Divergence literally let's look at what that looks like when this line is going up what that is telling you is that these two moving averages are getting further and further apart here they're close together here they're further apart here the even more further apart here they're even more further apart here they get less far apart that's it that's what the indicator measures and that's why it's not as simple as just trading in the direction of the line of Mac D it's really simply measuring how far those two moving averages are not from each other but how far they're moving away from each other or moving or moving toward each other let me give you another example if you're going to just trade in the direction of the macd indicator it's pretty sideways right basically it's just pretty sideways chomping a little bit however price action is actually moving up and it is making a higher high it moves from uh well this is the s p so it moves up more than 10 points but not the macd indicator why is that because of the definition of the indicator the mathematical function is again measuring what do you remember type it if you remember do a little quiz you can pause the video if you want to this way you get feedback loops for yourself and remember it so it is simply measuring how far these two moving averages are moving away from each other we're moving toward each other not how far they are from each other so the distance from here to here is roughly about the same as from there to there roughly about the same from there to there roughly about the same from there to there roughly about the same from there to there so they're not moving away from each other they're both moving up but they're staying roughly parallel and so there is no convergence or Divergence the CD of the Mas they're just kind of wiggling sideways but yeah price is moving up but in this way what how I see a macd indicator is an acceleration in the care our prices moving up in a more accelerated way over the last 12 bars than over the last 26 bars very very specific and measuring those bar is weighted on average with a weeding on the more recent data that's why it's an exponential moving average to really drive home the point make it more clearer as you see here the macd is moving down so is that bearish no not necessarily in fact if you notice through here the it's not even a moving average crossover sometimes people think there's moving average crossover involved not in the macd line we'll cover that in part two of the video series here on Mac Dean but we still have the green moving average the 12 exponential above the red one the 26 exponential stays above it the fast moving average sees above the slower moving average but macd moves down so why is it moving down well again it has to do with convergence and Divergence only so here we see that yeah the distance between the two moving averages is getting closer and closing in other words they're converging and because they're converging the macd goes down and then it's still very very close here but then when the lines start uh converging this was uh in the OR diverging in the opposite direction sorry then macd starts going back up people sometimes mistakenly use macd as a trend indicator a horrible horrible horrible idea again macd essentially just floating sideways here but the trend the direction of the market the long-term directional Market is clearly up macd is not giving you the direction of the market it is only telling you if it's accelerating we're decelerating that's it think of it in terms of is something is the market speeding up or is it slowing down but it's not measuring direction or Trend in and of itself now we're going to stop right here and again please apply this point to all indicators you must under understand what the indicator is actually measuring and then it'll tell you how to read it in your charts and that alone will give you a huge advantage over other Traders another my favorite indicator that again amateur Traders never look at is timing and I actually share this with my viewers for free my market timing indicator I use this on every single trade I take and it shows me exactly the right time to enter the market as well as exit the market get it at indicatorwebinar.com my gift to you and watch for part two to this video coming out [Music] thank you