The MACD is an indicator developed in 1986 and since then esta | APEX WHALE LIBRARY

The MACD is an indicator developed in 1986 and since then established as a primary indicator in the oscillator types besides the RSI or stochastic . The indicator mainly has the function of spotting reversals and potential entry points into the market to catch the appropriate values and upcoming reversal developments. Although the indicator can be used as a single signal for market action only it is best combined with other technical analysis aspects such as candlesticks or volume . The main timeframe to apply the indicator should be the daily timeframe , it can be also applied to higher timeframes such as the weekly to assess broader trends. The indicator can also be applied on lower timeframes such as the 4-hour or hourly however in this case the fake signals getting higher.

The MACD consists of 3 main elements, the first is the MACD-Line marked in my chart in orange which is calculated by the 12-day EMA (Exponential-Moving-Average) minus the 26-day EMA . The second element is the signal-line which is a 9-day EMA . Further comes the histogram which measures the distance from the MACD-Line to the signal line and the histogram is positive when the MACD-Line is above the signal-line as well as negative when it is below. The main signal happens when the MACD-Line crosses the signal-line when it crosses from the downside to the upside this is typically seen before a bullish reversal takes place and the same in reverse with the MACD-Line crossing the signal-line down when a bearish reversal takes place, in both cases also the histogram changes from positive to negative or negative to positive.

In any case, it is always necessary to combine the MACD with the current price-action happening as in this case comes the interesting part with the divergences happening that can lead to dedicated signals. These divergences happen when there is a discrepancy between MACD and the actual price-action happening indicating a potential change in direction of actual price-action as the MACD shows up with these signs. In any case, it is unavoidable to consider the price-action together with the MACD as otherwise, it can lead to catching a fake-out and getting stopped out of the position what should be avoided in trading. The MACD also does not typically spot overbought or oversold conditions as it is an indicator consisting of EMAs it represents the previously developed price-actions in relation to the ongoing and upcoming price-actions.
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Regular MACD Divergences: