I perceive this indicator as 'simplified Stochastic'. This helps to make its data more simple for analysis and closer to the price with smaller delays. At the same time, false signals will be filtered not so good. The indicator's structure includes three moving averages. There are two lines in the chart: MACD1 = EMAх- EMAу -line (1) MACD2=EMAz(EMAх -EMAу) - line (2) The first line (it is called MACD line) shows the difference between exponential moving averages of two prices. The second line is the approximation of the first (averaging by the defined figure z). Signals are formed in the same way as signals of any other classical oscillator. MACD also shows divergence. Divergence is the situation, when the price and technical indicators move in different directions. In classical literature divergence is considered as a signal of major shift in the direction of the trend. But it is always mentioned, that divergence works only "on correctional price movement, while on trend it can be deceptive". So it makes the statement that divergence is the signal that "trend reverse is expected", unlikely to be the truth.
