Indicators
MACD
4 min
The MACD (Moving Average Convergence Divergence) blends trend and momentum into one tool. It is built from moving averages but read like an oscillator.
The three parts
- The MACD line = a fast EMA minus a slow EMA (classically 12 minus 26). It measures the gap between two trends.
- The signal line = an EMA of the MACD line (classically 9).
- The histogram = MACD line minus signal line, shown as bars that grow and shrink.
How to read it
- Signal-line crossover — MACD crossing above the signal is bullish; below is bearish.
- Zero-line crossover — MACD above zero means the fast EMA is above the slow EMA (uptrend); below zero, downtrend.
- Histogram — expanding bars show strengthening momentum; shrinking bars show it fading, often before the lines actually cross.
- Divergence — like RSI, MACD diverging from price warns of a tiring move.
The limitation
Because MACD is built from EMAs, it is lagging and, like all moving-average tools, produces frequent false crossovers in sideways markets. It earns its keep in trending conditions and should be paired with a trend read, not traded blindly on every cross.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.