I first got introduced to MACD and RSI while following the blog of a prominent trader. He mentioned about MACD along with buy signal and RSI in acceptable levels on the chart screenshot of a $BHI and $NI. I was puzzled; it was something I need to learn.
Lifted from Investopedia:
MACD shows the relationship between two moving averages MACD is The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result of that calculation is the MACD line. A nine-day EMA of the MACD, called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals MACD is often displayed with a histogram which graphs the distance between the MACD and its signal line. when the MACD falls below the signal line, it is a bearish signal which indicates that it may be time to sell... when the MACD rises above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentumAnother explanation from David of Trading 212 at 3: 38 of video
If lines are about Zero line, it is upward trend (bullish) and if the line is below the Zero line, it is a downward trend (bear).Comment from CallousDnb
Generally if the averages cross AND the RSI is over 70 sell, if they cross low AND the RSI is near or below 30, buy.Here is a video by Ricardo Alvaro on adding MACD on your Investagram chart. But instead of the usual 12- ,26- and 9-period EMA, he uses 15- and 30- period. He had not provided reason for changing the default. But other opinions are that, it may be adjusted to 24, 52, 9 which makes the MACD slower and it removes most of the noise. RSI deserves another post.
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