MACD (Moving Average Convergence Divergence)

MACD, developed by Gerald Appel, is one of the most popular and versatile technical indicators. It measures the relationship between two exponential moving averages (EMA) of different periods, showing changes in the strength, direction, momentum, and duration of a trend. MACD consists of three components: the MACD line, the Signal line, and the Histogram.

MACD Line  = EMA(12) - EMA(26)
Signal Line = EMA(MACD Line, 9)
Histogram   = MACD Line - Signal Line

• When the fast EMA (12) is above the slow EMA (26), MACD is positive — bullish momentum.
• When the fast EMA is below the slow EMA, MACD is negative — bearish momentum.

• Trend and momentum — combines trend-following (MAs) with momentum (histogram).
• Zero line — acts as a neutral level; MACD above zero = bullish, below = bearish.
• Histogram — visualizes the speed of MACD changes; shrinking histogram = weakening momentum.
• Versatility — works across all markets and timeframes.

Signal line crossover

• MACD crosses above Signal — buy signal (bullish).
• MACD crosses below Signal — sell signal (bearish).

Zero line crossover

• MACD crosses above zero — trend turns bullish.
• MACD crosses below zero — trend turns bearish.

Histogram

• Histogram growing — momentum accelerating in current direction.
• Histogram shrinking — momentum decelerating, possible reversal.

Divergence

• Bullish divergence: Price makes lower low, MACD makes higher low.
• Bearish divergence: Price makes higher high, MACD makes lower high.

| Parameter | Default | Description | |-----------|---------|-------------| | Fast EMA | 12 | Short-term EMA period | | Slow EMA | 26 | Long-term EMA period | | Signal | 9 | Signal line EMA period |

| Component | Description | |-----------|-------------| | MACD_SIGNAL | The 9-period EMA of the MACD line | | MACD_HISTOGRAM | MACD Line minus Signal Line |

| Condition | Meaning | |-----------|---------| | MACD(12) > 0 | MACD above zero line — bullish trend | | MACD(12) cross_over MACD_SIGNAL | MACD crosses above Signal — buy | | MACD(12) cross_under MACD_SIGNAL | MACD crosses below Signal — sell | | MACD_HISTOGRAM > 0 | Histogram positive — bullish momentum | | MACD(12) cross_over 0 | MACD crosses zero — trend shift to bullish |

• The default parameters (12, 26, 9) work well for most markets.
• MACD on weekly charts gives powerful long-term trend signals.
• Signal line crossovers generate many signals — filter with trend direction (e.g., only buy when MACD > 0).
• Histogram divergence from price is one of the most reliable reversal signals in technical analysis.
• MACD is a lagging indicator — it confirms trends rather than predicting them.