• Skip to primary navigation
  • Skip to content
  • Skip to footer
Daniels Trading

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
 

The Advantages and Pitfalls of MACD Stock Trading

July 29, 2021 by Daniels Trading| Tips & Strategies

The moving average convergence divergence (MACD) is a technical indicator used to identify points of trend exhaustion. Classified as a momentum oscillator, the MACD is a popular means for traders to identify overbought and oversold market conditions. When used correctly, it is a powerful tool for the execution of trend, reversal, and range trading strategies.

MACD 101: Form and Function

In practice, MACD stock and futures trading applications are diverse. However, before you can begin using this indicator, it’s helpful to become familiar with a few key components. Here’s a look at the basic anatomy of the MACD:

  • The MACD line: The MACD line is a periodic moving average. It may be tailored to your desired parameters and is the basis for the study.
  • The “signal” line: The signal line is an exponential moving average (EMA) of the MACD itself. It may be configured in a variety of ways, but one of the most common is the nine-period EMA. The signal line provides cues on when to buy or sell the asset in question.
  • Histogram: The MACD histogram measures the momentum in a specific market. This is accomplished by examining the distance between the signal line and the MACD line. Larger bars equate to more momentum, whereas smaller bars point to slower market conditions.

When traders are using the MACD stock and futures indicator, it’s important to avoid becoming overwhelmed. The tool is user-friendly, updates automatically, and provides a visual depiction of evolving market conditions. When used with a robust software suite like dt Pro, the MACD can be an effective technical trading tool.

Convergence and Divergence

MACD users focus on two elements: convergence and divergence. Each indicates a different trend:

  • Convergence: Convergence is the term used to reference when the MACD line and signal line come together. In this instance, the histogram’s bars shrink and hover near the “zero” line. Under a converging scenario, price action is losing momentum and may be poised to change direction.
  • Divergence: On the other hand, divergence occurs when the MACD line and the signal line are moving apart. Accordingly, the histogram’s bars grow, indicating that momentum is picking up. Should divergence become apparent, MACD stock and futures traders may consider implementing a trend-based strategy.

Perhaps the most important aspect of the MACD is the crossover. A crossover takes place when the MACD line moves above or below the signal line. When this occurs, it’s a strong indication that a market is ready to be bought or sold. Generally, when the MACD line moves above the signal line, a buying opportunity is present; when the MACD line falls below the signal line, a selling opportunity may be setting up.

For more insights into how professional futures traders use this indicator, check out Daniels Trading broker Jace Jarboe’s breakdown of the MACD in our tips and strategies portal.

 

Want to Learn More About MACD Stock and Futures Trading?

As with most things in life, becoming proficient in using the MACD stock and futures indicator takes time and practice. However, with a bit of study and effort, any trader can get up to speed with this powerful technical tool in no time.

If you’re interested in becoming a market technician, a great place to begin is with StoneX’s online guide Basic Training for Futures Traders. In it, you’ll learn how to become a disciplined trader, set viable goals, and avoid impulse trading. Sign up for your free copy today!

Download Basic Training For Futures Traders

Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure
  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top