MACD - ANALYSIS OF WEAKNESSES OF THE MOST POWERFUL TECHNICAL ANALYSIS TOOL

Abstract

Due to the huge popularization of the stock trading amongst youth, in the recent years more and more of trading and brokerage houses are trying to find a one ‘easy to understand’ tool for the novice traders. Moving average convergence divergence seems to be the main pick and unfortunately inexperienced traders are relying on this one tool for analysis and trading of various securities. In this paper, I will investigate the validity of MACD as the ‘magic wand’ when solely used in investment trading decision making. The main limitation of this study is that it could be used more widely across industries and various sizes of companies, funds, and other trading instruments.