TechniTrader Beginner Education "Why MACD Gives False Signals" by Martha Stokes CMT

Market Conditions Affect MACD Reliability

MACD has several key elements that are important to know if you intend to use this indicator as a primary entry signal for buying long, selling short, or options trading. Despite the fact that MACD is extremely popular, empirical evidence shows that most traders using MACD are not consistently successful. 

Many traders are baffled by the fact that sometimes MACD works, while other times it fails completely. They endure frequent whipsaw trades that quickly wipe out small gains because MACD gives false signals during certain Market Conditions.

MACD gives false signals TC2000 chart - TechniTrader

The first thing to understand is that MACD is a Price and Time momentum indicator. That means that the price must move before the signal can form on MACD. Therefore MACD cannot lead price like several of the Quantity based indicators can. 

Consequently you would be entering the stock after the initial price move up or down, which can be an asset or liability depending upon the Market Conditions and Trading Conditions at the time... to read the full article CLICK HERE 

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Trade Wisely,

Martha Stokes CMT 

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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