TechniTrader Stock Trading Basics "What’s Better than MACD?"

How to Improve MACD Signals for Higher Profits


MACD is the most popular Retail Trader stock indicator, however it often lags price due to the fact that it is based on moving averages. There is a way to improve the use of MACD for earlier signals and entries to increase profits and lower risk. The Retail Traders group includes those who have learned how to trade the Stock Market from home.

As a Price and Time Momentum Indicator, MACD is missing one of the Primary DATA streams that is recorded for every stock transaction. This missing Data is what causes MACD to lag and give false positive or false negative signals during sideways trending price action. When the missing data is included in the analysis, MACD Users are able to see the more subtle patterns of MACD and are able to enter the stock before the run begins.

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This is a huge bonus for Swing Traders, Momentum Traders, Day Traders and other short-term trading styles. The missing data is a key element of Professional Trading analysis, and is why Professional Traders earn so much more profit per trade than Retail Traders.

By incorporating this one additional piece of data, StockCharts.com Users will find more opportunities to trade and will be trading with the Professional Traders more often, rather than trading against this large-lot Market Participant Group.

Did you know that most momentum runs are initiated by Professional Traders getting into a stock early, as they have access to information sooner than it is available to the Retail Trader. Also, the Professional Trader is an expert at routing their orders to execute on a precise penny execution at the selected venue. This makes their price patterns consistent, reliable, and rewarding for Retail Traders. However just using MACD is insufficient to find the Professional Traders buying activity because when they are buying quietly, they do not move price enough to create a MACD signal. That comes later. 

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The ChiOsc Indicator provides the missing data that allows Retail Traders to see the MACD momentum building, before the MACD crosses. By using these two indicators in combination, Retail Traders can enter a stock earlier before the sudden momentum run.

Below is a chart example of how this works. ChiOsc with its Exponential Moving Average EMA turns up and crosses a day ahead of MACD. This is the large-lot data that MACD is missing. The ChiOsc indicator is revealing strong volume momentum energy that has not yet altered price.

stockcharts chart 1 whats better than macd - technitrader

The following day, price does move with momentum and the gain is 10 points in a one day trade. See chart example below.

stockcharts chart 2 whats better than macd - technitrader

Summary 

MACD can be enhanced and improved by using indicators that include large-lot signal patterns. There are several indicators within StockCharts.com that do reveal large-lot professional traders activity before the stock moves with momentum. ChiOsc is the indicator variation created by TechniTrader for StockCharts.com Users who are our students.

TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch a wide variety of Webinars, to experience for yourself the excellence of TechniTrader education.

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Trade Wisely,

Martha Stokes CMT
 

TechniTrader technical analysis using StockCharts charts, courtesy of StockCharts.com


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

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