There are 3 essential parameters that make MACD chart work:
How is MACD calculated? Here is the formula:
12-day Exponential Moving Average (EMA) MINUS 26-day EMA
Also, you need a 9-day EMA which is called a "Signal Line". 9-day EMA is "drawn" on top of MACD chart and shows forex trader when to buy or sell.
There are 3 methods to be used with MACD:
The disadvantage of MACD indicator is there is a bit of lag. This happens because moving averages are simply the averages of historical prices and therefore there is a lag behind price. Despite the disadvantage, MACD is still considered the most favorite indicator among forex traders.