MACD Indicators in Sales & Trading
MACD is the Moving Average Convergence-Divergence. Among many, it is one of the most common stock indicators in the market. In S&T interviews, it is likely that you'll be expected to know something about stock indicators or even specifically MACD.
MACD shows the relationship between two moving averages of a security’s price. When calculating averages, any fluctuations in a certain time frame will have an impact on the final product. Therefore, it is important that we see recent price fluctuations as more important and that is exactly what MACD does.
✅ To obtain a MACD, we need 2 Exponential Moving Averages (EMA), a short-term EMA, and a long-term EMA. The difference between the two averages will be the MACD that we want to produce. The most common numbers in a MACD indicator are 12,26 and 9. 12 shows that the short term EMA is obtained from datas from the past 12 days, 26 shows that the long-term EMA is obtained from datas from the previous 26 days, by subtracting the EMAs, we can obtain the difference we want. And most importantly, 9 is the MACD which is obtained by a further calculation of EMAs with the differences of the past 9 days. However, it is worth noting that the notations are different with foreign investment apps. There is no need to panic if you run into a foreign interviewer because the calculations are all the same, the only difference is in the terminology. All you need to do to be sure is to check the calculations from different apps.
✅ So, how do we interpret MACDs? There are a few common scenarios. If the Difference is larger than the MACD and the Difference is larger than 0, we can treat it as a bullish signal. It means that it is recommended to buy the stock and the market is on the rise. If the Difference is lower than the MACD, it is a bearish signal, meaning that it is time to cash out. However, despite the macro environment, there are always different trading methods that are profitable. For example, when both the Difference and MACD is below 0, traders can try to profit from locating the bullish divergence.
But, there are no indicators that are 100% accurate. A bullish signal can be a false positive. We should analyse the market with more data and indicators, for example, looking at the RSI and the performance of other indexes. You will have a higher chance of getting an offer from IBD, so please do equip yourselves with more technical analysis skills.
Therefore, even though MACD is very common, it is not the only indicator that traders look at. If you want to stand out from other applicants, it is best to find a indicator that suits you best.
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