MACD

MACD (Moving Average Convergence/Divergence) is a momentum indicator developed by Gerald Appel in the late 1970s. It measures the relationship between two exponential moving averages (EMAs) of an asset's price. The indicator consists of three components: the MACD line (12-day EMA minus 26-day EMA), the signal line (9-day EMA of the MACD line), and the histogram (MACD line minus signal line), which visualises the gap between the two lines.

Traders read the MACD in three main ways. Signal-line crossovers: when the MACD line crosses above the signal line, it suggests upward momentum; a cross below signals downward momentum. Zero-line crossovers: when both lines are above zero, the short-term trend is above the long-term average, indicating bullish conditions, and vice versa. Divergence: when price makes a new high but the MACD forms a lower high (bearish divergence), the uptrend may be losing strength; a new price low with a higher MACD low signals a potential bullish reversal. Because MACD is based on moving averages, it is a lagging indicator and can produce false signals in sideways markets, so traders typically combine it with volume analysis or the RSI for confirmation. For a deeper breakdown, see our full guide on the MACD indicator.