There are a variety of different tools that investors use to study market trends. Most of the highly effective market tools are different forms of charts. However, investors can beef up their knowledge of the stock market if they use the specific indicators used in the MACD stock market analysis. This system, which means the Moving Average Convergence/Divergence, tries to spot general market trends to tell investors when they should buy or sell stock.
This unique market indicator is more helpful than other forms because it blends two different moving averages systems together to create one easy to use system. It is able to blend these two averages together and measure the difference between the two lines to see how the market is moving.
The benefit of this analysis is that it can be added to the already impressive technical arsenal. Investors that use this tool are able to get broad impressions of the market that are not available if they stick to the more traditional analysis tools.
This imminently useful tool was defined by Gerarld Appel many years ago to fill a market gap. The reason that the MACD is unique is that is takes the longer averages of the market away from the shorter averages to create a moving picture. The two lines end up crossing either below or above a point value of zero.
The most widely used versions of the MACD use 26 day and 12 day moving averages to complete their financial pictures. These two time frames give enough of a view to the investor to be able to identify general trends without getting bogged down in the details of really long term analysis. There is a shorter version of the MACD available that incorporates only 9 days into its system. Most investors consider this time frame too short, and prefer to use the longer time frames for more accurate results.
While there are many perks to using the MACD, there are still some drawbacks to this system. Some people feel that investors may make hasty decisions based on its results without proper investigation. As always, take the time to investigate before you act on the stock market.