This study investigates the profitability of Moving average convergence divergence in Indian stock market. Utilizing relatively recent data from 2017 to 2019 on the selected top market capitalization stocks in Indian stock markets, the authors find that the MACD oscillator will generate reliable buy and sell signals which makes the investors to choose right stocks for their short term investments. Conclusion of this finding is that the investors can use MACD trading rules to earn abnormal profits on a consistent basis.
Inhaltsverzeichnis (Table of Contents)
- Abstract
- Introduction
- Literature Review
- Research Methodology
- Trading Rules
- Rule 1
- Rule 2
- Rule 3
- Rule 4
- Empirical Results
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This research paper aims to investigate the profitability of using the Moving Average Convergence Divergence (MACD) oscillator as a tool for predicting stock price movements in the Indian stock market. The study utilizes data from 2017 to 2019 on select top market capitalization stocks.
- Profitability of MACD trading strategies in the Indian stock market.
- Effectiveness of MACD as a technical analysis tool for short-term investments.
- Analysis of different MACD trading rules and their performance.
- Application of technical analysis in generating reliable investment signals.
- Comparison of MACD performance with buy-and-hold strategies.
Zusammenfassung der Kapitel (Chapter Summaries)
Abstract: This study analyzes the effectiveness of the MACD oscillator in predicting profitable short-term investments in the Indian stock market using data from 2017-2019. It concludes that MACD trading rules can consistently generate abnormal profits.
Introduction: This chapter introduces technical analysis as a method for predicting stock price movements based on past data. It highlights the MACD oscillator as an effective tool combining momentum and moving average analysis, using 12-day and 26-day exponential moving averages to generate buy and sell signals. The chapter explains the calculation of MACD and its signal line using a 9-day exponential moving average.
Literature Review: This section reviews existing literature on the MACD indicator, citing studies that highlight its reliability (Gerald Appel) but also caution about its robustness across different markets (Chong, Ng, and Liew, 2014) and the importance of testing its profitability in specific markets (Nguyen Hoang Hung, 2016). It also mentions research indicating that MACD buy signals might underperform buy-and-hold strategies, while offering potential for short selling (Safwan Mohd Nor and Wickremasinghe, 2014).
Research Methodology: This chapter details the data collection process, using daily closing prices of seven top Indian stocks (Reliance Industries, TCS, HDFC Bank, ITC, Maruti Suzuki, Larsen & Toubro) and the Nifty 50 index from April 2017 to March 2019 obtained from NSE India. The chapter outlines the calculation of the EMA used in determining the MACD.
Trading Rules: This section outlines four different trading rules based on the MACD and its signal line, specifying conditions for generating buy and sell signals based on their relationship with the zero line and each other. These rules form the basis for the empirical analysis.
Empirical Results: This chapter presents an example of MACD chart for Reliance Industries, illustrating how the MACD and signal lines can be interpreted to generate buy and sell signals. The example demonstrates periods of strong buy and sell signals based on the relative positions and crossings of the MACD and signal lines and their relation to the zero line. The analysis highlights the need for caution in investment decisions.
Schlüsselwörter (Keywords)
MACD, Technical Analysis, Trading Strategy, Indian Stock Markets, Exponential Moving Average (EMA), Short-Term Investment, Stock Price Prediction, Buy Signals, Sell Signals.
Frequently Asked Questions: A Comprehensive Language Preview of MACD Trading Strategies in the Indian Stock Market
What is the main topic of this research paper?
This research paper investigates the profitability of using the Moving Average Convergence Divergence (MACD) oscillator as a tool for predicting stock price movements in the Indian stock market between 2017 and 2019. It analyzes different MACD trading rules and compares their performance to buy-and-hold strategies.
What are the key objectives of this study?
The study aims to determine the profitability of MACD trading strategies in the Indian stock market, assess the effectiveness of MACD for short-term investments, analyze the performance of different MACD trading rules, examine the application of technical analysis in generating reliable investment signals, and compare MACD performance with buy-and-hold strategies.
What data was used in this research?
The research utilizes daily closing prices of seven top Indian stocks (Reliance Industries, TCS, HDFC Bank, ITC, Maruti Suzuki, Larsen & Toubro) and the Nifty 50 index from April 2017 to March 2019, obtained from NSE India.
What is the MACD oscillator and how does it work?
The MACD oscillator is a technical analysis tool that combines momentum and moving average analysis. It uses 12-day and 26-day exponential moving averages to generate buy and sell signals. A 9-day exponential moving average of the MACD line (the signal line) is also used for signal interpretation.
What trading rules were used in this study?
The study outlines four different trading rules based on the MACD and its signal line. These rules specify conditions for generating buy and sell signals based on the relationship between the MACD and signal lines and their relationship to the zero line. Specific details of these rules are provided within the research paper.
What were the main findings of the study?
The study concludes that MACD trading rules can consistently generate abnormal profits in the Indian stock market during the specified period. However, the paper cautions the need for careful interpretation of signals and highlights that investment decisions should be made with caution.
What are the limitations of the study?
The study focuses specifically on the Indian stock market and a limited time period (2017-2019). The robustness of the findings across different markets and time periods needs further investigation. Additionally, the research acknowledges previous studies showing potential underperformance of MACD buy signals compared to buy-and-hold strategies in certain contexts.
What are the key themes explored in the research?
Key themes include the profitability of MACD trading strategies, the effectiveness of MACD as a technical analysis tool for short-term investments, the comparison of MACD performance with buy-and-hold strategies, and the application of technical analysis in generating reliable investment signals within the context of the Indian stock market.
Where can I find more details about the research methodology?
The research methodology section of the paper details the data collection process, the calculation of the exponential moving averages (EMAs) used in determining the MACD, and the specific steps taken in analyzing the data.
What are the key words associated with this research?
Keywords include MACD, Technical Analysis, Trading Strategy, Indian Stock Markets, Exponential Moving Average (EMA), Short-Term Investment, Stock Price Prediction, Buy Signals, and Sell Signals.
- Quote paper
- Viswanatha Reddy Pedirappagari (Author), 2019, Prognosticate the signals of stock prices using the MACD oscillator, Munich, GRIN Verlag, https://www.grin.com/document/501650
