MACD

The Moving Avarege Convergence Divergence, or more simply MACD, is a technical analysis indicator invented and developed by Gerald Appel in the 70s. From a graphical point of view, the MACD appears as two lines that oscillate around the zero threshold. The fastest line, defined MACD line, is given by the difference between two “Moving Average” calculated on CLOSE prices at 12 and 26 periods. The slower line instead, called MACD Signal, is an Exponential Moving Average with 9 periods of the MACD line.

Operation:
From the operational point of view there are different interpretations relating to the moment in which the MACD generates BUY or SELL signals when the two lines cross. A first method of using the MACD, generates a BUY signal when the MACD line (red in the example) crosses the MACD Signal (green in the example) from bottom to top, we will have a SELL signal instead if the MACD line ( red in the example) should cross the MACD Signal (green in the example) from top to bottom.
The MACD can also be used to report overbought or oversold zones. We will have overbought when the lines, which are working above the zero threshold, are far from the zero line, we will have overstepped when the lines that are working below the zero threshold are far from the zero line itself. Reliability is closely linked to the assignment of a value for “distant” since it is not possible simply to establish an objective value on the basis of which this condition can be considered confirmed.
Finally, another interpretation is to trigger the BUY or SELL signal when the lines cross the zero threshold. Although the signal is more reliable, this type of operation causes a large part of the movement to be lost in the bud. Being the MACD an indicator based on “Moving Average”, by nature it will move delayed than the pure price. If we need to add a further delay to this delay due to the confirmation of the signal with the passage of the zero threshold, it is quite understandable how our input timing could be significantly affected.