IntermediateMAD Academy0:45Indicators

MACD Is Two Averages Wearing a Costume

Strip the histogram away and MACD is the distance between two moving averages — which explains everything it does well and everything it does badly.

0:45 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00MACD looks like its own indicator. It is two moving averages, subtracted.
  2. 0:05The three parts. The line is one average minus another. The signal smooths the line. The bars are the gap.
  3. 0:14What a crossing is. A signal crossing says the gap between two averages just changed direction. That is all.
  4. 0:24Why it whipsaws sideways. With no trend the two averages sit on top of each other and the line crosses constantly.
  5. 0:32The part worth watching. Shrinking bars mean the averages are converging — the move is losing its push.
  6. 0:40Read the histogram as a speedometer, not as a buy button.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
MACD Is Two Averages Wearing a Costume — MAD Academy Training Video · MadStockAlerts