Moving Average Convergence Divergence (MACD)

MACD (Moving Average Convergence/Divergence) is one of the most popular technical analysis indicators. It is used to determine the strength and direction of a trend, as well as potential reversal points.

How is the MACD calculated

• MACD Line = EMA(12) − EMA(26)
• Signal Line = EMA(9) of the MACD Line
• Histogram = the difference between the MACD Line and the Signal Line

Thus, the MACD combines the properties of both a trend indicator (Moving Averages) and an oscillator (a histogram of fluctuations around zero).

MACD Signals

1. Zero Line Crossover

• MACD crosses zero from below to top → signal to open a Long deal.
• MACD crosses zero from above to below → signal to open a Short deal.

2. MACD and Signal Line Crossover

• MACD crosses the signal line from bottom to top → Buy-signal (open Long).
• MACD crosses the signal line from top to bottom → Sell-signal (open Short).

3. Histogram Trend Change

• The histogram changes from negative to positive → Buy-signal (open Long).
• The histogram changes from positive to negative → Sell-signal (open Short).

MACD in Veles bots

• The “MACD Histogram Trend” indicator provides a signal as long as a specific trend persists (as long as the histogram bars are the same color):
  • Histogram is in the green zone → Buy-signal (open Long).
  • Histogram is in the red zone → Sell-signal (open Short).
• The “Reverse Signal” option is available for the MACD — you can use standard Long-signals to open or to average a Short deal (and vice versa).
• The higher the timeframe, the more reliable the signals, as shorter timeframes result in more market noise.

MACD Limitations

• The indicator is a lagging indicator, meaning signals are generated only after a movement has already begun.
• On a flat market, the MACD can generate many false signals.
• For increased accuracy, it’s best used in combination with RSI, support/resistance levels, or volume filters.