MACD Trend Classification Strategy

DESCRIPTION OF THE "MACD TREND CLASSIFICATION STRATEGY" INDICATOR
FUNDAMENTAL CONCEPT
This indicator is an advanced implementation of the MACD (Moving Average Convergence Divergence) that classifies the market into 4 main categories (A, B, C, D) based on the relative position of the DIF and MACD lines relative to the zero axis. It provides a systematic framework for identifying trends and determining market strength.

MAIN COMPONENTS
1. BASIC LINES
DIF (MACD Line): Difference between fast EMA (12) and slow EMA (26)

DEA (Signal Line): 9-period exponential moving average of DIF

MACD Histogram: Difference between DIF and DEA, colored by category

2. MARKET CATEGORIES
🔵 CATEGORY A (GREEN) - STRONG BULL MARKET
Conditions: DIF > 0 and MACD > 0

Characteristics:

Fully bullish market

Maximum buyer participation

Accumulation/growth phase

Visualization: Green histogram

🔵 CATEGORY B (BLUE) - BULLISH TRANSITION WITH RISK
Conditions: DIF > 0 but MACD < 0

Characteristics:

Bullish market with temporary weakness

Possible correction within bullish trend

Requires volume confirmation

Visualization: Blue histogram

🔵 CATEGORY C (RED) - BEAR MARKET
Conditions: DIF < 0 and MACD < 0

Characteristics:

Fully bearish market

High risk for long positions

Distribution/decline phase

Visualization: Red histogram

🔵 CATEGORY D (ORANGE) - BEARISH TRANSITION
Conditions: DIF < 0 but MACD > 0

Characteristics:

Bearish market with temporary recovery

Possible technical rebound

Most difficult phase to trade

Visualization: Orange histogram

DETAILED OPERATION
1. TREND STRENGTH DETECTION
The indicator evaluates strength according to these criteria:

VERY STRONG: DIF > DEA > 0 (light green background)

MODERATELY STRONG: MACD > 0 but DEA ≤ 0

WEAK: MACD < 0 but DIF ≥ 0

VERY WEAK: DIF < DEA < 0 (light red background)

2. INFORMATION TABLE
In the upper right corner, a table displays:

Current active category

Exact values of DIF and MACD

Trend status (Active/Inactive)

Strength level (Very strong, Moderate, Weak, Very weak)

3. TRANSITION SIGNALS
The indicator automatically detects changes between categories:

A → B: Bullish strength decreases

B → A/C: Possible continuation bullish or change to bearish

C → D: Beginning of recovery in bear market

D → A/C: Possible change to bullish or return to bearish

4. VISUAL MARKERS
Green triangle ↑: Start of Phase A (buy)

Red triangle ↓: Start of Phase C (sell/wait)

Information labels: Explain transitions

INTERPRETATION RULES
TYPICAL PATTERNS
Bull market: ABABA sequence

Bear market: CDCDC sequence

KEY TRANSITION RULE
After A always comes B

After B → A or C (depends on volume)

After C always comes D

After D → A or C (depends on volume)

PRACTICAL APPLICATION
FOR LONG-TERM INVESTMENT
Main focus: Category A

Avoid: Category C

Consider: Category D for strategic entries

FOR MEDIUM-TERM TRADING
Priority: Category B > C

Confirmation: Volume in B→A transitions

FOR SHORT-TERM TRADING
Focus: Categories A and C

Risk management: Tight stops in C

ENTRY/EXIT SIGNALS
BUY SIGNALS
Strong: D→A transition with volume increase

Moderate: Confirmation in stable Category A

Conservative: Category B with positive divergence

SELL/WAIT SIGNALS
Strong: B→C transition with volume increase

Moderate: Stable Category C

Cautionary: Category D without bullish confirmation

INDICATOR ADVANTAGES
Visual clarity: Different colors for each state

Complete information: Numerical values + qualitative classification

Early alerts: Detects changes before traditional MACD

Adaptability: Useful for different time horizons

Objectivity: Clear rules without ambiguous interpretation

LIMITATIONS AND CONSIDERATIONS
Confirmation needed: Always confirm with volume

Inherent delay: Like all moving average-based indicators

Ranging markets: May generate false signals in ranges

Parameter adjustment: Default values (12,26,9) can be modified

This indicator transforms MACD technical analysis from a subjective tool to an objective trend classification system, allowing decisions based on clear, repeatable rules.