Impact Macd And Fundamental Announcements In Forex Trading?

By CashMarble In financial | Comments(1)

1 Comment »

1. I see several things wrong with your blog explanation of MACD.
   First, you gave the textbook description of how MACD is computed and used, as a fast MA crossing over a slow MA.
   Then you say signals are generated by divergence. Not true. The signals are generated from the crossover, as you first stated, with or without divergence. Divergence is just another aspect of momentum indicators. RSI and other momentum indicators also show divergence, but you will go broke trading just divergence. It happens all the time if you just look, and divergence is little better than 50% correct.
   The problem with Momentum Indicators is in a trending market, like right now in the stock market. These indicators can stay Overbought, or in this case, Oversold for days and weeks, signaling a reversal, while the market just keeps going down. The divergence will not help you here, and instead, gives a false signal. This is worse than a “wrong” signal.
   Didn’t Gerald Appel develop this indicator? If you want to know how to apply an indicator, read the origins of it first by its creator, then test your “theories” thoroughly before using them, or worse, telling others to use them. Publishing ignorance just gives the whole business a bad name.
   Appel said the “signal” comes after the crossover when passing through the 50% zone, I think, as a confirmation.
   I gave up on this one a long time ago as a short-term indicator.

   Comment by dredude5 — October 2, 2009 @ 6:37 am

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