In this video, we'll take a look at the moving average convergence, divergence or McGeady indicator.
First thing we'll do is we'll put that on the chart.
So let's go ahead and click on indicators, type in erm a CD and it'll come up, make sure to click
McGeady and not McGeady strategy and you can see it opens up a separate window underneath and there
is a histogram and a couple of moving averages.
The histogram measured for the spread between the moving averages and whether or not the moving averages
are rising and falling.
So two moving averages if you plotted them on the chart.
And the parameters that are the standard parameters, they would look exactly the same, it's just basically
a way of measuring momentum in its own little window.
So how do we use this?
Well, there are a multitude of ways that people use McGeady.
The first is the zero signal line cross here, so.
You can see there's a measurement from a thousand to a thousand now, this will adjust depending on,
you know, the range of of the instrument.
But in this case, in Bitcoin, it's 8000 to negative thousand.
And every time it crosses the zero line, traders will either be buyers or sellers.
That's probably the most straightforward and easiest way to trade mcgeady.
Some people will use Crossover's as a signal to get involved.
You can see that the the moving averages do cross over occasionally, so like a moving average crossover
system, the problem you have with this and it's going to be the same with an actual moving average
crossover system, is that in a flat market you get a lot of false signals.
So like this market was going sideways and you got chopped up, you eventually did get some profit,
but you took a couple of unnecessary losses in that meantime.
So.
A way to filter that out is typically to aim for high or low crossover's, ignore these ones, but try
to find the ones that are much higher.
And then some people will use it as a divergence, so oscillators and this is one of the family of indicators
and oscillator, sometimes what you'll see is prices moving higher, but yet the indicators on the oscillator
are not.
And what that tells you is that perhaps the underlying momentum is waning and that is a sign of internal
weakness.
People will sometimes use the moving averages.
Sometimes they'll use the histogram.
It really comes down to, you know, how quickly you want it to happen, more often than not, though,
you will see the histogram used.
So I've got three assets.
I've got Bitcoin, Canadian dollar, Japanese yen, currency pair and U.S. Steel.
Let's go ahead and walk through these and see if there are some, you know, ways we could have used
Makdisi to help us.
The most obvious place on this chart is right around here.
We had seen a moving average crossover at an extremely high level, and this, of course, was the highest
of Bitcoin, so not a huge surprise to see that it failed at that level.
It gotten way overextended and, you know, up to about 14000.
And we have rolled over a bit since then.
You can see there was another crossover here.
There is a bullish crossover here.
But notice how the market itself was relatively flat.
So probably not the greatest signal.
You can see here, same thing, a Polish crossover, you know, we started swinging up, but the market
was drifting a little bit lower.
It was just kind of lackluster.
Part of the filter can also be how wide the histogram is.
You know, you want to see a wider histogram.
It makes more sense that it may give you because it shows a greater diverging of the two moving averages,
that there's more strength, if you will, in whichever direction.
The.
Zero line crossover right here would have been an excellent buying signal, for example, as well,
but with Licorne, let's take a look at the four hour chart and you can see it works on smaller time
frames as well.
There's your moving average crossover.
And we did.
In fact, drop wasn't a huge move, but it did move.
Moving average crossover right here led to the market picking up quite a bit until, you know, probably
right about here where you would have got a cross signal.
So that, of course, set up quite nicely for a potential run.
And as a result, it looks as if this has been steady along the way.
In the next video, I'll take a look at understanding stock placements and signs of momentum loss.