Originally posted by Bogdan G. Click here
for the full review
Why does the MACD suck?
Being formed of two Moving Averages, which are lagging by nature, it also lags big time behind price, especially in ranging periods, or in times when price moves strongly in one direction and immediately reverses. It just can’t keep up with the speed of price and it looks like a truck trying to compete with a NASCAR racing car. To put it simple, it’s just too slow, but maybe there is hope for it: let’s see why it doesn’t suck.
Why and when doesn’t the MACD suck?
I just told you that the MACD is too slow…well, this can also be a good thing sometimes: imagine you are in a strong trend that is about to retrace. If you were using a faster tool, that would get you out of the trend, signaling a trade in the opposite direction, but the MACD lines would just come closer together, signaling a momentum decrease, not a counter trade. The market conditions sometimes fake out even the slow moving MACD, making it cross, but that just shows us once again that there is no indicator that gives us perfect signals all the time.