Example of trading with MACD

Case Study: Bajaj Auto

The chart below is of Bajaj Auto share for a period starting from July 2009 to may 2010. The chart shows signal line andMACD. We have plotted certain points at crossover where a buy or sell signal is generated.

Their can be two ways to trade first the bullish way i.e. first buy and then sell it and the other way bearish i.e. first sell and then buy.

We will first trade bullish

1. First occasion

• At point A (price around 1025) MACD makes crossover against signal line giving a buy signal.
• At point B (price around 1235)MACD breaches signal line giving a sell signal.
• Profit is around 20 %.
• Gain is 210Rs(from 1025Rs to 1235 Rs).
• Time period from 15th july 09to 7th August 09 .

2. Second occasion

• At point C (price around 1169 ) MACD makes crossover against signal line giving a buy signal.
• At point D (price around 1650 ) MACD breaches signal line giving a sell signal.
• Profit is around 40 %.
• Gain is 481Rs(from 1169Rs to 1650Rs).
• Time period from August 09 end to October 09 mid.

3. Third occasion

• At point E(price around 1470 )MACD makes crossover against signal line giving a buy signal.
• At point F(price around 1700) MACD breaches signal line giving a sell signal.
• Profit is around 15 %.
• Gain is 230Rs(from 1470Rs to 1700Rs).
• Time period is from 16th November 09 to 18th December 09.

4. Fourth occasion

• At point G(price around 1737) MACD makes crossover against signal line giving a buy signal.
• At point H(price around 1780) MACD breaches signal line giving a sell signal.
• Profit is around 2.5%.
• Gain is 43Rs (from 1737Rs to 1780Rs).
• Time period from 10th February 2010 to 23rd February 2010.

5. Fifth occasion

• At point I(price around 1730) MACD makes crossover against signal line giving a buy signal.
• At point J (price around 1830) MACD breaches signal line giving a sell signal.
• Profit is around 5.8%.
• Gain is 100Rs(from 1730Rs to 1830Rs).
• Time period from 2nd March 2010 to 12th March 2010.

6. Sixth occasion

• At point K(price around 1860) MACD makes crossover against signal line giving a buy signal.
• At point L(price around 2080) MACD breaches signal line giving a sell signal.
• Profit is around 12%.
• Gain is 220Rs(from 1860Rs to 2080Rs).
• Time period from 26th March 2010 to 16th April 2010.

By going bullish too we can trade profitably with around 1300 Rs.

Similarly we can trade bearish i.e. first sell and then buy

1. First occasion - we will sell at point B(1235 Rs) and buy at point C(1169 Rs), with a gain of 66 Rs.
2. Second occasion - we will sell at point D(1650 Rs) and buy at point E(1470 Rs), with a gain of 180 Rs.
3. Third occasion - we will sell at point F(1700 Rs) and buy at point G(1737 Rs), with a loss of 37 Rs.
4. Fourth occasion - we will sell at point J(1830 Rs) and buy at point K(1860 Rs), with a loss of 30 Rs.

By going bearish too we can trade profitably with around 180 Rs.

Let's compare long term traders with bullish traders

Very long term traders buying Bajaj Auto shares somewhere at point A(1025 Rs) and selling at point L(2080 Rs) will make profit of 1050 Rs.
While smart traders going both bullish and bearish trading may get profit of 1300 Rs + 180 Rs i.e. around 1500 Rs.

Other tutorials which further enhance better grasp on MACD can be found at:
Back to MACD TutorialWhen MACD should be avoided.

Our website provides free Stock screening based on MACD. It can be found at below link:

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