MACD signal line cross zero centerline

[glebecki]

When the MACD's slower signal line crosses below zero, what does that signify? When the MACD's slower signal line crosses above zero, what does that signify?

 

[timsk]

Hi glebecki,
Quite a few members would give the same answer to both your questions - along the lines of 'nothing much'!

For a less cynical response and a good insight into how MACD works, along with how to use it, you could do worse than to look at these three videos - of which this is part 1: Technical Analysis Indicator MACD
Tim.

 

[Sigma-D]

I'm not sure the zero line is as significant compared with the slope of the signal line, whether it is rising or falling, regardless of its location with respect to the zero line. I thought at one time the relationship between the signal and base was significant, but as with all indicators they can only lwt you know what has already happened.

I understand the humble moving average with respect to price has stood the test of time quite well, I must have a look at that myself one day.

 

[NVP]

define slope

 

[Sigma-D]

define slope

Not flat.

 

[NVP]

that doesnt narrow it down much ......

 

[Sigma-D]

that doesnt narrow it down much ......

Are you seriously saying you can't tell the difference between flat, a bit of a slope and a lot of slope?

 

[Vicorka]

When the MACD's slower signal line crosses below zero, what does that signify? When the MACD's slower signal line crosses above zero, what does that signify?

When MACD crosses zero it means that you have crossover of slow and fast MA that are used in calculation of MACD. This men that shorter-term trend described by fast MA is breaking below or above longer-term trend which by technical analysis would mean confirmation of a new trend. Does it guarantee future trend development in direction of a confirmed trend - NO. More about MACD

 

[Forexmospherian]

define slope

i get my ray lines to do that for me

 

[glebecki]

MACD signal line centerline cross

Hi glebecki,
Quite a few members would give the same answer to both your questions - along the lines of 'nothing much'!

For a less cynical response and a good insight into how MACD works, along with how to use it, you could do worse than to look at these three videos - of which this is part 1: Technical Analysis Indicator MACD
Tim.

Thank you, Tim. I chose your 'less cynical response' and studied the MACD videos you suggested that I view - Parts 1-3. They were very helpful. Can you suggest another source to help me figure out what to combine the MACD with to increase the robustness of the MACD signals mentioned in the videos? --george

 

[glebecki]

When MACD crosses zero it means that you have crossover of slow and fast MA that are used in calculation of MACD. This men that shorter-term trend described by fast MA is breaking below or above longer-term trend which by technical analysis would mean confirmation of a new trend. Does it guarantee future trend development in direction of a confirmed trend - NO. More about MACD

Thank you, Vicorka. for your response. My question was about what the MACD signal line's crossing the zero center line signified. Your link to More about MACD was very helpful. --george

 

[glebecki]

I'm not sure the zero line is as significant compared with the slope of the signal line, whether it is rising or falling, regardless of its location with respect to the zero line. I thought at one time the relationship between the signal and base was significant, but as with all indicators they can only lwt you know what has already happened.

I understand the humble moving average with respect to price has stood the test of time quite well, I must have a look at that myself one day.

Thank you, Sigma-D, for your helpful response. --glebecki

 

[timsk]

. . .Can you suggest another source to help me figure out what to combine the MACD with to increase the robustness of the MACD signals mentioned in the videos? --george

Hi George,
Technical analysis indicators fall into two groups: leading and lagging. These terms are often misunderstood in that critics of indicators will argue that all indicators are lagging - because they are calculated using historical prices and volume. Whilst their point is both valid and true - it does not mean that:
A. All indicators are useless, or that . . .
B. Within the discipline of technical analysis, that it is incorrect to describe one group of indicators as 'leading'. In other words, it is perfectly valid to describe certain indicators as 'leading'.
With reference to point B. - this article will make things a lot clearer: Introduction to Technical Indicators and Oscillators

Once you've read that, you will, hopefully, understand that MACD is a 'lagging' indicator and that there's . . .
A. Nothing wrong in that. Importantly, it doesn't make it less good than a leading indicator and that . . .
B. It's the best type of indicator to use in a trending market, i.e. if you want to use indicators at all, then a 'lagging' indicator is the best type to use in a trending market.

As to what to use in conjunction with MACD, I would suggest you look at a 'leading' indicator which will work well in a non-trending market, i.e. when it's range bound. The most popular are a sub group called oscillators, of which stochastics, CCI and RSI are the best known.

The anti-indicator lobby make very valid points about technical indicators in general and, certainly, all indicators are highly unlikely to 'work' in isolation and work consistently well over time. To use them judiciously is a skill on its own that will take time to acquire. As a starting point, if you've not yet seen it, take a look at this FAQ, paying particular attention to the section on indicators: Essentials Of Technical Analysis
Enjoy!
Tim.

 

[glebecki]

Intro to Technical Indicators and Oscillators

Hi George,
Technical analysis indicators fall into two groups: leading and lagging. These terms are often misunderstood in that critics of indicators will argue that all indicators are lagging - because they are calculated using historical prices and volume. Whilst their point is both valid and true - it does not mean that:
A. All indicators are useless, or that . . .
B. Within the discipline of technical analysis, that it is incorrect to describe one group of indicators as 'leading'. In other words, it is perfectly valid to describe certain indicators as 'leading'.
With reference to point B. - this article will make things a lot clearer: Introduction to Technical Indicators and Oscillators

Once you've read that, you will, hopefully, understand that MACD is a 'lagging' indicator and that there's . . .
A. Nothing wrong in that. Importantly, it doesn't make it less good than a leading indicator and that . . .
B. It's the best type of indicator to use in a trending market, i.e. if you want to use indicators at all, then a 'lagging' indicator is the best type to use in a trending market.

As to what to use in conjunction with MACD, I would suggest you look at a 'leading' indicator which will work well in a non-trending market, i.e. when it's range bound. The most popular are a sub group called oscillators, of which stochastics, CCI and RSI are the best known.

The anti-indicator lobby make very valid points about technical indicators in general and, certainly, all indicators are highly unlikely to 'work' in isolation and work consistently well over time. To use them judiciously is a skill on its own that will take time to acquire. As a starting point, if you've not yet seen it, take a look at this FAQ, paying particular attention to the section on indicators: Essentials Of Technical Analysis
Enjoy!
Tim.

Tim, I just finished reading your recommendation: Introduction to Technical Indicators and Oscillators. I read and studied the article and found the experience especially rewarding. Thanks to you, I feel I am growing in my understanding. I liked the concept of getting alignment among indicators before placing a trade: for example, positive divergence plus MACD bullish cross for confirmation, etc.
Thanks, --george

 

[glebecki]

Tim, I just finished reading your recommendation: Introduction to Technical Indicators and Oscillators. I read and studied the article and found the experience especially rewarding. Thanks to you, I feel I am growing in my understanding. I liked the concept of getting alignment among indicators before placing a trade: for example, positive divergence plus MACD bullish cross for confirmation, etc.
Thanks, --george

Wow! Tim. I just finished Essentials of Technical Analysis, the 2nd of your recommended readings. That is one sobering article. Sobering after getting somewhat boosted after the 1st assignment. Being somewhat scattered and overwhelmed by charts and attempts at deciphering TA, I welcome the advice to choose simplicity. I intuited that I need to trim complexity; it is really encouraging to see that in writing. Regarding Point #4 suggesting focus on price, please recommend a source for Point and Figure study. I just came across Jeremy du Plessis' book on P&F in a search. Do you know it? Recommend it?
Thanks, and take care, --george

 

[timsk]

. . .Regarding Point #4 suggesting focus on price, please recommend a source for Point and Figure study. I just came across Jeremy du Plessis' book on P&F in a search. Do you know it? Recommend it?

Hi George,
For PnF, have a look at these:
Member Profile: dentist007
dentist007 is T2W's resident guru on all things PnF - so have a gander at his profile and the links that are in it.
Point and Figure Charting: Part 1 - The Basics by Dave Baker
This is the first of two articles which cover the basics.
Why Use Point & Figure Charts? by Steven Archer
Another general article on PnF.
Point & Figure Gone High Tech by William Rafter
A more advanced article.

Lastly, The Definitive Guide to Point and Figure by Jeremy Du Plessis
Check out the reviews - mine's in amongst them.

Without wishing to dampen your enthusiasm at all, keep in mind that there are no magic bullets, no easy cookie cutter solutions. PnF is just one way of graphically presenting price action: it's not inherently better or worse than candlesticks, bar or line charts etc. - it's just an alternative. Some folks like 'em, some folks don't.
Happy reading!
Tim.

 

[glebecki]

Sober enthusiasm re: Point and Figure

Hi George,
For PnF, have a look at these:
Member Profile: dentist007
dentist007 is T2W's resident guru on all things PnF - so have a gander at his profile and the links that are in it.
Point and Figure Charting: Part 1 - The Basics by Dave Baker
This is the first of two articles which cover the basics.
Why Use Point & Figure Charts? by Steven Archer
Another general article on PnF.
Point & Figure Gone High Tech by William Rafter
A more advanced article.

Lastly, The Definitive Guide to Point and Figure by Jeremy Du Plessis
Check out the reviews - mine's in amongst them.

Without wishing to dampen your enthusiasm at all, keep in mind that there are no magic bullets, no easy cookie cutter solutions. PnF is just one way of graphically presenting price action: it's not inherently better or worse than candlesticks, bar or line charts etc. - it's just an alternative. Some folks like 'em, some folks don't.
Happy reading!
Tim.

Hi, Tim. I am reading everything on Point and Figure I can set my eyes on including making my way through dentist007's thread on learning to read price action with p/f charts. I appreciated reading your entry #80 in the dentist's thread: am I correct in thinking that when you say 'bullish support pattern' you mean price above the Bullish Support Line and when you say 'bearish resistance pattern' you mean price below the Bearish Resistance Line? Or do you mean higher lows, higher highs in the first case and lower highs, lower lows in the second case? Or what do you mean?
Thanks for all the references to PnF. --george

 

[timsk]

Hi, Tim. I am reading everything on Point and Figure I can set my eyes on including making my way through dentist007's thread on learning to read price action with p/f charts. I appreciated reading your entry #80 in the dentist's thread: am I correct in thinking that when you say 'bullish support pattern' you mean price above the Bullish Support Line and when you say 'bearish resistance pattern' you mean price below the Bearish Resistance Line? Or do you mean higher lows, higher highs in the first case and lower highs, lower lows in the second case? Or what do you mean?
Thanks for all the references to PnF. --george

Hi George,
I'm glad you're finding the links interesting.

With regard to your question, yes, I ought to have used the word 'line' and not 'pattern'. Apologies for the confusion. Bullish support lines are rising trend lines drawn at 45 degrees from an important low. Bearish resistant lines are falling trend lines drawn at 45 degrees from an important high. They may or may not connect a series of higher lows (for an up trend) or a series of lower highs (for a down trend). If you look at dentist007's chart in the post after mine, you'll see some of the bullish support lines link higher lows and some don't.

Bullish support and bearish resistance lines are a unique feature of PnF charts because of the nature of their construction. What's great about them is that they are totally objective, so you'll never find PnF users arguing over whether they're drawn correctly. This is in stark contrast to chartists hand drawing 'conventional' trend lines on bar and candlestick charts. It's still possible to draw subjective trend lines on PnF charts (linking higher lows in an up trend or lower highs in a down trend) - which are not at 45 degrees. If you subscribe to a good PnF charting provider (e.g. Updata, ShareScope and Bull's Eye) - they'll automatically draw in the lines on the chart for you. Needless to say, such service comes at a price!

Hope that answers your question and makes sense?
Tim.

 

[glebecki]

charting provider

Hi George,
I'm glad you're finding the links interesting.

With regard to your question, yes, I ought to have used the word 'line' and not 'pattern'. Apologies for the confusion. Bullish support lines are rising trend lines drawn at 45 degrees from an important low. Bearish resistant lines are falling trend lines drawn at 45 degrees from an important high. They may or may not connect a series of higher lows (for an up trend) or a series of lower highs (for a down trend). If you look at dentist007's chart in the post after mine, you'll see some of the bullish support lines link higher lows and some don't.

Bullish support and bearish resistance lines are a unique feature of PnF charts because of the nature of their construction. What's great about them is that they are totally objective, so you'll never find PnF users arguing over whether they're drawn correctly. This is in stark contrast to chartists hand drawing 'conventional' trend lines on bar and candlestick charts. It's still possible to draw subjective trend lines on PnF charts (linking higher lows in an up trend or lower highs in a down trend) - which are not at 45 degrees. If you subscribe to a good PnF charting provider (e.g. Updata, ShareScope and Bull's Eye) - they'll automatically draw in the lines on the chart for you. Needless to say, such service comes at a price!

Hope that answers your question and makes sense?
Tim.

Hi, Tim. Thanks for the clarification of Bullish Support Pattern and Bearish Resistance Pattern plus your comments on trend lines on P&F charts. "If you subscribe..." I subscribe to StockCharts.com which provides P&F charts with major trend lines drawn on the chart. I am unable to add my own 45 degree minor trend lines directly on to their P&F charts. Do you know how I can get around that? I mean use some tool to draw directly on an updating StockChart.com P&F chart?
--george

 

[timsk]

Hi, Tim. Thanks for the clarification of Bullish Support Pattern and Bearish Resistance Pattern plus your comments on trend lines on P&F charts. "If you subscribe..." I subscribe to StockCharts.com which provides P&F charts with major trend lines drawn on the chart. I am unable to add my own 45 degree minor trend lines directly on to their P&F charts. Do you know how I can get around that? I mean use some tool to draw directly on an updating StockChart.com P&F chart?
--george

Hi George,
I subscribed to StockCharts last year but, in spite of them bigging up their PnF charts, I never liked them at all. If I'm honest, I've tended to favour Renko charts for quite a few years now, so I'm not best placed to offer suggestions about PnF charting providers or any up-to-date developments with PnF generally. One of my reasons for not renewing my subscription was that e-mail support from StockCharts themselves was useless. In fact, I never received so much as an automated acknowledgement - let alone a personal reply - to any of my e-mails. However, their internal members' forum - StockCharts Answer Newtork (scan) - is pretty good and I did get some joy there. I recommend you post your question there and see if other StockCharts users can advise you. Sorry not to be of more help!
Tim.