Hey, everyone shown here where you're trading and today we're going to go over the moving average Convergence divergence or more commonly known as the MACD. So the Mathy is a trend following indicator that uses the price differences between long and short term price trends. It uses two separate moving averages that move between overbought and oversold conditions, with the 12 and 26 day exponential moving averages being the most common use for it. As you can see at the bottom of my chart, the MACD is plotted like most other oscillators where you can have overbought and oversold conditions with a middle line for neutral price action.

So there's a lot different ways you can trade with this indicator. But the two that I'm going to go over today are the crossover strategy and the divergent strategy. The crossover strategy is a strategy that involves trading a stock when the MACD reaches overbought or oversold condition and the 12-day EMA crosses over the 26 de EMA. So on this one-minute chart of the spy, you can see that we had a real nice sell-off in the morning and the MACD reach very oversold conditions down here.

I have the 12 day moving average and light blue with the 26 day in orange. So the idea behind the strategy is when we reach these oversold conditions, we look for the 12 day moving average to crossover the 26th day and when this happens, the indicator is telling us that there may be a shift in momentum and we could get a reversal. The way you would attack this trade is when the crossover happens, you would look to get long with the lows being your stop. So you can have multiple profit targets for this trade.

I'd like to take profit off at the moving averages and then my main target at the Vu app. here. In this particular example, we got the View app and even further so this would have been a really nice trade to take. Alright, so that's a crossover strategy.

let's have a look at a divergence strategy trade. see this one is on. Lumber Liquidators You can see that Prices had a really strong opening drive here with the second leg moving higher than the previous peak and I mark this often for the trendline to. to Kind of show you how it looks up here in the price action.

but if you look down here in the MACD indicator, you'll notice that the first peak is actually higher than the second peak. This is called divergence. When you get divergence like this, that's usually an indication that momentum is shifting and you're likely to get a reversal. So the way you would trade this strategy is similar to the crossover.

You'd trade against the highs or lows, you know? So if we took this trade, sure we'd look to have thirty seven or a little bit over thirty seven as our stop. And then we'd like to take profit at the moving averages and the V web. This was a real clean move. Move down to the view, up and even further.

So this is a really good trade. I Like looking at divergences, they're not as easy to find as a crossovers. This is an extreme example with these Peaks but most often times the divergence will be much more subtle in harder to spot. So that's another strategy using the MACD and that's it, covering the MACD strategies.

If you have any questions, leave us a message in the comments below right? So you guys next time. Oh hey, I didn't see you there while I was just working on the dream board for my next home run trade. Hopefully it comes soon. Until then, make sure you subscribe to get email alerts anytime.

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