ArthurLarl
09-27-2016,
Alright I know the basics and the purpose the the MACD and the MACD histogram. It's just moving averages blended together to create convergence/divergence. A popular way to use it is the 26/12 with a 9 being the slowest line. With that said, its really a bunch of moving averages so why the criticism of this indicator not working during volatile times?
Criticism found on wikipedia:
"With the emergence of computerized analysis, it has become highly unreliable in the modern era, and standard MACD based trade execution now produces a greater distribution of losing trades[citation needed (http://en.wikipedia.org/wiki/Wikipedia:Citation_needed)]. Some additions have been made to MACD over the years but even with the addition of the MACD histogram, it remains a lagging indicator. It has often been criticized for failing to respond in mild/volatile market conditions.[3] (http://en.wikipedia.org/wiki/MACD#cite_note-2) Since the crash (http://en.wikipedia.org/wiki/Dot-com_bubble) of the market in 2000, most strategies no longer recommend using MACD as the primary method of analysis, but instead believe it should be used as a monitoring tool only. It is prone to whipsaw (http://en.wiktionary.org/wiki/whipsaw), and if a trader is not careful it is possible that they might suffer substantial loss, especially if they are leveraged (http://en.wikipedia.org/wiki/Leverage_%28finance%29) or trading options."
Criticism found on wikipedia:
"With the emergence of computerized analysis, it has become highly unreliable in the modern era, and standard MACD based trade execution now produces a greater distribution of losing trades[citation needed (http://en.wikipedia.org/wiki/Wikipedia:Citation_needed)]. Some additions have been made to MACD over the years but even with the addition of the MACD histogram, it remains a lagging indicator. It has often been criticized for failing to respond in mild/volatile market conditions.[3] (http://en.wikipedia.org/wiki/MACD#cite_note-2) Since the crash (http://en.wikipedia.org/wiki/Dot-com_bubble) of the market in 2000, most strategies no longer recommend using MACD as the primary method of analysis, but instead believe it should be used as a monitoring tool only. It is prone to whipsaw (http://en.wiktionary.org/wiki/whipsaw), and if a trader is not careful it is possible that they might suffer substantial loss, especially if they are leveraged (http://en.wikipedia.org/wiki/Leverage_%28finance%29) or trading options."