MACD is a trend following indicator.

Being a trend following indicator, MACD indicator was created by Gerald Appel with the main objective of indicating support and resistance points of the market. According to Gerald Appel, he came up with the concept of a crossover to identify support and resistance point. With his concept of crossover, Gerald Appel created two curve lines, that is; the MACD curve and the signal line curve. With these two curves, Gerald Appel further stated that for a support point to be there, the MACD should cross above the signal line from below while for resistance point, the MACD should cross below the signal line from above.

Gerald Appel further stated that MACD indicator has 3 periods, that is; 12,26 and 9. These three periods are the Exponential Moving Average. The difference between 12-period and 26-period represent the Exponential Moving Average of the MACD while 9 represent the signal line. 

Gerald Appel further derived the formula for ging the valuettes of MACD indicator as follows;

MACD= (EMA of close price period 12)- (EMA of close price period 26)

MACD is moving average convergence divergence.
whereas;

EMA is an exponential moving average while;

Therefore, since MACD indicator is a trend following indicator based on crossover of the MACD and signal line, it therefore follows that when the MACD indicator crosses above the signal line from below when the market is moving downwards, that will be an indication that a support point has been created over there thus signaling the trader to close any sell position and open a buy position since the market will start moving upwards. On the other hand, if the MACD indicator crosses below the signal line from above when the market is moving upwards, that will be an indication that a resistance point has been created over there thus signaling the trader to close any buy position and open a sell position since the market will start moving downwards. This is indicated from the candle sticks chart below;

From the candlesticks chart above, there are 4 points, A, B, C and D. Point A and B represent crossover points while point C which is red curve represent the signal line with a period of 9. Point D on the other hand which is a blue curve represents the MACD(Moving Average Convergence Divergence) which is a difference between 12 and 26 EMA periods.

At point A, the MACD has crossed above the signal line from below thus an indication of a support point over there. This will signal the trader to close any sell position and open a buy position since the market is starting to move upwards at that point. On the other hand, at point B the MACD has crossed below the signal line from above thus an indication of a resistance point over there. This will signal the trader to close any buy position and open a sell position since the market is starting to move downwards at that point.

Recommendation:If you are a day trader,just use 1 min,5 min ,15 min and 30 min time frame while if you are a swing trader just use 1 hour and above time frame if you want the MACD indicator to work well for you

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