Trading Outpost

Stop Using MACD Like Every Retail Trader Uses It

Every figure, definition and factual claim the finished video puts on screen, chased to a source. The charts in this video are illustrative series drawn to teach the mechanism, and each one says so on screen; nothing in the video asserts that a particular market did a particular thing on a particular day.

What MACD is, and who made it

Moving average convergence divergence was developed by Gerald Appel in the late 1970s. It is built from two exponential moving averages of the close, and the reading is the distance between them rather than a price.

• Appel, Gerald. Technical Analysis: Power Tools for Active Investors. FT Press, 2005. The book in which Appel sets out the indicator and its construction.
• OKX, What is the MACD indicator. https://www.okx.com/en-us/learn/what-is-macd-indicator States the settings are “the numbers Gerald Appel used when he popularised the indicator in the late 1970s”.

The three numbers on screen: 12, 26 and 9

The video puts these three periods on screen and calls them defaults and conventions rather than findings.

• The MACD line is the 12 period EMA of the close minus the 26 period EMA of the close.
• The signal line is a 9 period EMA of the MACD line.
• The histogram is the MACD line minus the signal line.

Sources:

• TradingView, MACD indicator documentation. https://www.tradingview.com/scripts/macd/ Fast Length default 12, Slow Length default 26, Signal Length default 9, source Close.
• Binance Academy, Explanation of the MACD indicator. https://www.binance.com/en/square/post/584066 “The MACD settings are based on 12, 26 and 9 period EMAs by default.”
• OKX, What is the MACD indicator. https://www.okx.com/en-us/learn/what-is-macd-indicator Gives the same three defaults and the same construction.

The platforms shown beside those numbers

Four marks appear next to the defaults. Each one is a platform whose own material states those periods, or whose charts are TradingView’s:

• TradingView documents 12, 26 and 9 as the defaults for its MACD indicator. https://www.tradingview.com/scripts/macd/
• Binance states the same defaults in Binance Academy’s own explainer. https://www.binance.com/en/square/post/584066
• OKX states the same defaults in its own learn material. https://www.okx.com/en-us/learn/what-is-macd-indicator
• Coinbase Advanced charting is provided by TradingView, including MACD, so it ships TradingView’s defaults. https://help.coinbase.com/en/coinbase/trading-and-funding/advanced-trade/dashboard-overview

Robinhood was considered for this row and is deliberately not in it. Robinhood documents that MACD is available on its advanced charts but does not publish its default periods, so the mark would have been sitting under a claim about that company that nobody could check.

• Robinhood, Technical indicators. https://robinhood.com/us/en/support/articles/viewing-indicators/

Why the histogram turns before the crossover

The video says the histogram gives warning earlier than the crossover does. This is a property of the arithmetic rather than an observation about any particular market.

The histogram is the MACD line minus the signal line. A crossover is by definition the moment those two are equal, so the histogram is exactly zero at every crossover. For the histogram to reach zero from a positive peak it must first stop rising and then decline. The peak therefore always precedes the crossover, and the gap between the two is the warning the video is describing.

What the zero line means

The video treats the zero line as a regime marker. This is definitional:

MACD above zero means the 12 period EMA is above the 26 period EMA, because the MACD line is the difference between them. Below zero means the reverse. It is a statement about the relationship between two averages of the same price series, and nothing more.

• TradingView, MACD indicator documentation. https://www.tradingview.com/scripts/macd/

Divergence

The definitions the video uses:

• Bearish divergence: price makes a higher high while MACD makes a lower high.
• Bullish divergence: price makes a lower low while MACD makes a higher low.

The video’s caution, that divergence is a warning rather than a reversal and can repeat several times inside a move that continues, is the standard treatment rather than a contrarian reading.

• Binance Academy, Explanation of the MACD indicator. https://www.binance.com/en/square/post/584066 Covers divergence and the point that it does not reliably mark a turn.
• OKX, What is the MACD indicator. https://www.okx.com/en-us/learn/what-is-macd-indicator

The charts, and what the numbers on them are

Every chart in the video is an invented series, generated from a stated model and labelled “Illustrative” on screen. They exist to show what the arithmetic does, and none of them is offered as evidence that something happened in a real market.

The figures drawn on them are computed from the series being shown rather than chosen:

• The percentages that report how much of a move had already happened when a signal printed are measured between the swing low that began the leg and the high that ended it.
• The reward to risk multiples are the distance from entry to target divided by the distance from entry to stop, taken from the three prices the shot is drawing. Where two are compared, both use the same stop and the same target, so only the entry differs.
• The counts of zero line crossings, and the tallies of what happened after each crossover, are counted from the series on screen.

No win rate, no backtest result and no claim about how any strategy performs appears anywhere in the video.

Not checked

• The video characterises how institutional desks think about momentum, liquidity, slippage and position management. That characterisation is the script’s, and it is a description of practice rather than a citable figure. Nothing in it is presented as a measurement.
• The order book depth shown while discussing liquidity and slippage is an invented ladder used to show what walking a book does to an average fill. It is not a real book from any venue, and the basis points figure is arithmetic on that invented ladder.