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