Moving Average Convergence Divergence MACD

Convergence Trading

The moving average convergence divergence (MACD) indicator combines some of the principles of oscillators, like those already discussed, with a dual moving average crossover approach. It uses two metrics, both represented with lines. The faster of the two lines (called the MACD line) is the difference between exponentially smoothed moving averages of closing prices the 12- and 26-day moving averages are most commonly used. The slower of the two lines is the exponentially smooth average of the...

Pairs Trading A Brief History

Before beginning a formal investigation into pairs trading, putting the strategy into a historical context may be of some interest to the reader. Pairs trading and market-neutral strategies alike are not new. They have been around in one form or another since the beginning of listed markets and have been studied and used by some of history's most notable traders. The hedge fund industry, however, has given a new face to these strategies as well as the specific vehicle needed to demonstrate...