Opinions differ.
I don’t use it, myself (but I used to). My view is that as oscillators based on moving averages go, it’s actually one of the rather better, rather more helpful ones, if clearly understood and appropriately used. But that’s a [I][U]big[/U][/I] “if”, as MACD is [B]very[/B] widely misunderstood and (in my opinion) misused.
Different people use them in different ways.
A very good source of information about them is the book [I]Trading for a Living[/I] (recently re-published under the title [I]The New Trading for a Living[/I]) by Dr. Alexander Elder, an originally Russian psychiatrist in New York, who explains quite well how human behaviour causes price movements in markets.
His view (and mine) is that the MACD is only really useful for monitoring divergences between the MACD histogram and the price. These divergences he considers to be among the very strongest and most reliable trading signals that an indicator can ever give you, and I think he’s right.
Unfortunately, however, learning to appreciate and interpret them is certainly “on the difficult side”, as these things go. And much internet information on the subject - especially forum information - is pretty misguided, so it isn’t easy.
The difficulties are compounded by the fact that in this forum, many traders use a platform called “MT4”, which has always displayed the MACD incorrectly and in a particularly unhelpful way.
[U]Three key things to appreciate about the MACD[/U]:
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The MACD comprises [U]two[/U] lines: the first (sometimes called “fast line” or “MACD line”) represents [I]the difference between two specified moving averages of different periodicities[/I]; the second (sometimes called the “slow line” or “signal line”) is simply a moving average [I]of the first line[/I] (in other words it’s a moving average of the differences between two other specified moving averages).
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There’s also an additional (and good) option called an “MACD Histogram”, which displays the difference between [I][U]the MACD’s first line and its second line[/U][/I] in the form of a histogram, either with or without the two lines themselves also being displayed on the same chart. Note that the histogram is [B][U]not[/U][/B] displaying “the difference between two moving averages” (as is quite widely but entirely mistakenly believed, and as is wrongly stated in many threads in this forum).
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There’s probably no point in trying to use it for forex trading from its original, old-fashioned settings. These were based on daily charts for stock trading, when there were 6 trading days in a week and therefore about 26 in a month, to show a comparison between trends over two weeks (12 days) and a month (26 days). This has nothing to do with forex at all, and especially nothing to do with anything faster than daily charts. The standard “French settings”, for institutional forex trading, as used at Crédit Agricole and formerly at Crédit Lyonnais, are 9/19/6. I used to use it on fast, intraday charts with settings of 16/32/12. Linda Bradford Raschke has published a trading system based on using fast charts with settings of 3/10/16. These facts might help you to appreciate that there’s a lot of flexibility in “how you set it up” according to “what you want it to do”!
I would stay well away from the page in the School, here, which purports to explain MACD - decidedly [I]not [/I]one of the site’s better or more helpful pages, in my opinion (I just hope nobody will object to my mentioning this! :8: ).