What line needs to cross what in order to buy or sell? How do you place a stop if you are using the MACD for buy and sell signals? Thanks.

The MACD is a Convergence Divergence statistical oscillator. Unlike its slow stochastics cousin, it gives longer term direction.

Let’s say you are swing trader and are using the 10 day / 60 minute charts and the MACD with two lines (one is blue and the other is red). When the blue line (EMA 9) on the top crosses falls and crosses the red line below then the stock is pulling back.

The opposite gives you a buy signal. That is when the MACD blue line (EMA 9) crosses above the red line, it means the stock may be swinging up. If you use the MACD with, say a candlestick, and the candlestick is a long white candle, shaven top with great buy side volume, then it is a good time to buy.

The MACD should not be your only indicator. Use the MACD with stochastics, volume, bollinger bands, moving averages, support and resistance lines, fibonacci retracements, and other chart patterns and candlestick patterns.

Develop your own trading style and also note that some stocks work with the MACD while other stocks work with other indicators. If you have the software, back test your various indicators for each stock you own to see which ones work the best.

Technorati Tags: bollinger bands, candlestick patterns, chart patterns, convergence divergence, macd, minute charts, moving averages, oscillator, red line, resistance lines, side volume, signals, stock, stocks, term direction

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