Moving Average Convergence Divergence: funcionamento matemático e comportamento em tendências

Abstract

Operating in the stock market means accepting to take risks for profit. To help in making decisions, investors have at their disposal special tools to analyze financial data; one of these tools is called technical analysis. It uses recurring patterns of price and volume to estimate the number of purchases and sale prices, which is represented by graphs and indicators. The Moving Average Convergence Divergence (MACD) outstands among indicators by its objectivity to function as a standalone source of decisions. For this reason, we observed the behavior of this indicator in markets with trends. Three research methods were used in this study: a mathematical deduction in its formula, a statistical simulation in all actions of the Bovespa index in 2014 and a case study on actions with a clear tendency at the same time. The results from the MACD indicates that, most of the time, purchasing operations that significantly increased in the short term yielded a significant benefit as prices are likely to keep rising. There are three noteworthy points to make from these results. First, one should thereafter sell rapidly, not more than nine days later, as past this point share fluctuations could bring profit or loss. Second, losses at that point can come from abrupt falls in operations price that are common after the operation started; although earnings usually come from the rapid growth and slow decline of prices. And last, there were no significant differences in the way to proceed based on the different analysis methods. It follows then that, despite being widely used, the MACD would not bring predictive security to well-aimed operations if used as the only source to take a decision. Nevertheless, understanding their behavior will have to make their practical uses more well informed.