What is MACD and How To Use it ?

 MACD is a very simple to follow but a great tool to find and ride trending moves. It is a complete indicator in itself and it is alone sufficient for identifying , entering and even riding the trend with trailing stop loss. It is usually not given much importance because it seems " too simple " on most of the times, but  i have noticed that the simplest things works best in markets and in " life " in general. 

If we have a relatively easy tool to follow, we should not try to make our process complicate just so that it looks fancy. I have been using MACD for quite some time now and it has been working great for me to find trends and even ride them without any noise.

MACD is calculated by subtracting the 26 EMA by the 12 EMA.  Whatever value comes is known as the " Macd line " and it is then used along a 9 EMA  " signal line ".

So basically when the signal line crosses above or below the MACD line, we have to enter or exit the trade and simply ride it till it doesn't converges on the opposite side. 

Will try to explain this concept with some examples from the US markets. 

This is Daily chart of Netflix. You can see here that the blue line is the signal line and the orange line is the MACD line. So when the signal line crosses the MACD line from below, we can buy it and keep holding it till it doesn't breaks down from it and shown in second arrow.

You will notice that it even gets us out of the stock almost at the top and saves our money as well as time. We can re enter only if it again crosses the MACD line from below, till then we can sit on the sidelines of even short if it is an FNO stock.

This is Daily chart of TESLA. Here i have marked with horizontal lines whenever the signal line crossed over from the MACD line. You can see the points that we got if we would be riding along with the signal line. It is as easy as that, nothing fancy. It is a great indicator for swing trade and for positional or long term too, in that case, use higher time frame charts such as weekly and monthly.

Charts are used from TrendSpider website. Link - https://trendspider.com