Oscilattor: MACD (Moving Average Convergence/Divergence)

This oscillator is one of the most powerful technical tools in the arsenal of many traders. The indicator is used to check the strength and direction of a trend, in addition to defining reversal points.

The MACD histogram plots the difference between the exponential MAs of 12 periods and 26 periods. If prices are rising, the 12-period MA will rise faster than the MA of 26. The reversal will happen if prices start to fall. The MACD has no limits but has a zero average around which it tends to oscillate. The biggest trading principle is to sell when the MACD value reaches the positive area and buy when it turns to the negative area.

The MACD also contains the trigger line: the exponential MA of 9 periods. It generates buy / sell signals when the MACD line crosses it from the top or bottom side. The main flaw of the indicator is that the MACD gives us these signals with a delay in relation to the price action itself. However, these signals are more reliable than the crossing signal of the common MAs.

Also, pay attention to the convergence / divergence between the indicator and the price. Fall convergence is formed when the price reaches new lows while the MACD histogram lows (buy signal). High divergence is formed when the price renews its highs, at the same time that MACD highs fall (sell signal). 


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