MACD (Moving Average Convergence Divergence)
Trend-following momentum indicator showing relationship between two moving averages
What is MACD?
MACD (Moving Average Convergence Divergence) is a trend-following momentum indicator that shows the relationship between two exponential moving averages (EMAs) of a security's price. Developed by Gerald Appel in the late 1970s, it's become one of the most widely used indicators in technical analysis.
The MACD consists of three components: ā¢ MACD Line: The difference between the 12-period and 26-period EMA ā¢ Signal Line: A 9-period EMA of the MACD line ā¢ Histogram: The difference between MACD and Signal line
Traders look for: ā¢ Crossovers: When MACD crosses above the signal line (bullish) or below (bearish) ā¢ Divergences: When price makes new highs/lows but MACD doesn't ā¢ Zero line crossovers: MACD crossing above zero is bullish, below is bearish
Formula
MACD Line = 12-period EMA - 26-period EMA Signal Line = 9-period EMA of MACD Line Histogram = MACD Line - Signal Line
š” Example
When MACD crosses above the signal line while both are below zero, it suggests bullish momentum is building from oversold conditions - a potentially strong buy signal.
How to Use MACD
- 1Identifying trend direction and momentum strength
- 2Generating buy/sell signals through crossovers
- 3Spotting potential reversals through divergence analysis
- 4Confirming breakouts from consolidation patterns
ā” Pro Tips
- ā¢MACD works best in trending markets, not sideways consolidation
- ā¢A rising histogram suggests strengthening momentum
- ā¢Bullish crossovers above the zero line are stronger than those below
- ā¢Use our MACD Bullish screener to find crossover signals automatically
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