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MACD Ultimate Guide + 5 Profitable Trading Strategies

macd settings day trading

Since the TRIX is a lagging indicator, it might take a while for that to happen. We will exit our positions whenever we receive contrary signals from both indicators. We hold our position until the MACD lines cross in a bearish direction as shown by the red circle on the MACD. This position would have brought us profits of 60 cents per share for about 6 hours of work.

macd settings day trading

The MACD is part of the oscillator family of technical indicators. The Moving Average Convergence Divergence (MACD) indicator is a momentum indicator that follows trends and displays the connection between two Moving Averages of the price of an asset. It is a tool that traders use to determine when bullish or bearish momentum is high. The crossover – often termed the “signal line crossover” – occurs when the MACD line crosses the signal line.


On the flip side, you may want to consider increasing the trigger line period, so you can monitor longer-term trends. Generally speaking, more trade signals is not always a good thing and can lead to overtrading. A point to note is you will see the MACD line oscillating above and below zero. We will discuss this in more detail later, but as a preview, the size of the histogram and whether the MACD stock indicator is above or below zero speaks to the momentum of the security. As aforementioned, the MACD line is very similar to the first derivative of price with respect to time. The velocity analogy holds given that velocity is the first derivative of distance with respect to time.

  • For those who may have studied calculus in the past, the MACD line is similar to the first derivative of price with respect to time.
  • Therefore, if your timing is slightly off, you could get stopped out of a trade right before price moves in the desired direction.
  • Exiting a trade properly is often the toughest part of trading well and the addition of a second MACD can help with that.
  • Also, while the MACD is a powerful tool, it should not be used in isolation.

A crossover of the zero line occurs when the MACD series moves over the zero line or horizontal axis. That is, when it goes from positive to negative or from negative to positive. This means that the two EMAs comprising the MACD series are precisely equal. For those who may have studied calculus in the past, the MACD line is similar to the first derivative of price with respect to time. The signal line is similar to the second derivative of price with respect to time, or the first derivative of the MACD line with respect to time.


Since moving averages accumulate past price data in accordance with the settings specifications, it is a lagging indicator by nature. It is simply designed to track trend or momentum changes in a stock that might not easily be captured by looking at price alone. In the previous examples, the various signals generated by this indicator are easily interpreted and can be quickly incorporated into any short-term trading strategy. At the most basic level, the MACD indicator is a very useful tool that can help traders ensure that short-term direction is working in their favor.

  • But varying these settings to find how the trend is moving in other contexts or over other time periods can certainly be of value as well.
  • One of the drawbacks of this strategy, though, is that it tends to produce fewer signals.
  • Given this construction, the value of the MACD indicator must be equal to zero each time the two moving averages cross over each other.
  • This basic strategy will allow you to buy into the pullbacks of a security that has strong upward momentum.
  • MACD, the trend whisperer, unveils momentum shifts and potential entry points by analyzing moving averages.

Combining momentum and trend, you have the opportunity to catch some strong momentum trends. A setup and entry is part of the plan but without a way to exit, we have nothing. So, let’s work on stop loss locations and ways to take our profits. is not responsible for any loss of money and possible risks connected with options trading. If it is, you can do more testing and possibly chart trading the system either in a demo account, or with small amounts of capital. Essentially, the fast line and the slow line make up the MACD line and then the signal line is the 9 period EMA of the MACD line.

Top 10 MACD settings for effective trading

After going long, the awesome oscillator suddenly gives us a contrary signal. For those unfamiliar with the awesome oscillator, it is obviously an oscillator. It’s simply the difference of a 5-period simple moving average and a 34-period simple moving average. Building upon the concept of a triple exponential moving average and momentum, we introduce to you the TRIX indicator.

The second green circle highlights when the TRIX breaks zero and we enter a long position. We exit the market right after the trigger line breaks the MACD in the opposite direction. In other words, if one of the indicators has a cross, we wait for a cross in the same direction by the other indicator. As a general rule of thumb, if the MACD is below the zero line, do not open any long positions.

Chapter 1: What is the MACD Stock Indicator?

Assets fluctuate often in financial markets, so don’t take a brief crossover as a sign of something big. The histogram is an important visual indicator of momentum for traders. If the MACD line goes from positive to negative, this is a bearish sign. Some crossovers are ideal for identifying trend shifts and others for changes in momentum.

This article on MACD settings for Day Trading is the opinion of Optimus Futures, LLC and is not intended to be trading advice. The theory behind the MACD is not too complicated to understand. Essentially, it determines the value of the difference between an instrument’s Exponential Moving Averages over the last 12 and 26 days. The 12-day Exponential Moving Everage (EMA) is the quicker of the two Moving Averages that make up the MACD. In general, most traders use candlestick charts and support and resistance levels with MACD.

Best MACD Settings for Trading 1, 5, 15, and 30-Minute Charts

Some traders will focus exclusively on the acceleration component of MACD (signal line crossover of the MACD line). Instead, let’s consider adding to it to make it at least slightly more robust. In this case, we’ll add a 50-period simple moving average (SMA). Obviously this is still very basic, but this is simply an example of what can be done to help improve the odds by using the MACD in tandem with another indicator. Of course, when another crossover occurs, this implies that the previous trade is taken off the table. Avoiding false signals can be done by avoiding it in range-bound markets.

The last component of the MACD is the histogram, which displays the difference between the two EMAs of the indicator (12 and 26). Thus, the histogram gives a positive value when the fast EMA (12) crosses above the slow EMA (26) and negative when the fast crosses below the slow. To learn more about how to calculate the exponential moving average, please visit our article which goes into more detail.

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