MACD
An indicator built on the relationship of two moving averages and a momentum histogram. It helps confirm the pace of a move — signals need trend context.
Definition
MACD (Moving Average Convergence Divergence) is an indicator based on the relationship between moving averages and a momentum histogram — it helps you assess the pace and potential shifts in momentum, not issue “buy/sell” calls detached from price. It is most often used as a filter or confirmation rather than the only trigger.
Example
Price makes a higher high within an uptrend; you look for long continuation only when the MACD histogram shows no clear bearish divergence by your own rule — or the other way round: divergence is an alert to be careful, not an automatic short.
Anti-example / common mistake
Trading every MACD line crossover on the M5 chart with no structural context. On a low timeframe MACD produces noise; overfitting the parameters to one backtest is the second classic error.