MACD is a trend oscillator, also called moving average convergence-divergence indicator.
The indicator is used to identify reversal points and trend direction.
Two exponential moving averages for 12 and 26 periods respectively are used to calculate MACD.
For the signal line, 9 periods from the MACD line are used.
The MACD signal can be interpreted in three different ways.
The first is when the MACD line crosses the zero level.
If the MACD line crosses the zero level from top to bottom, it is a signal to trade short, if it crosses from bottom to top, it is a signal to trade long.
The second is the fact of crossing of MACD and signal lines.
If the MACD line crosses the signal line from top to bottom – it is a signal for trading in short, if from bottom to top – for trading in long.
The third is the fact of trend change according to the MACD histogram.
If the histogram value changes from negative to positive – it is a signal for trading in long, if from positive to negative – it is a signal for trading in short.
A larger timeframe allows you to give more accurate signals, as the volatility of asset prices is higher on shorter timeframes.
