MACD Indicator Explained
The MACD (Moving Average Convergence Divergence) measures the relationship between two moving averages to show trend direction and momentum in one indicator.
How MACD is built
The MACD line is the difference between a fast and a slow EMA (classically 12 and 26). A signal line (a 9-period EMA of the MACD line) is plotted on top, and the histogram shows the gap between them. When the fast EMA pulls away from the slow one, momentum is building.
Above the zero line, the fast average is above the slow one — a bullish backdrop; below zero is bearish. The histogram growing means momentum is accelerating, shrinking means it is fading.
Crossovers and divergence
A bullish crossover is the MACD line crossing above its signal line; the reverse is bearish. Like all moving-average signals, crossovers lag, so they confirm rather than predict.
The higher-value read is divergence — price makes a new high but the MACD makes a lower high (bearish), warning momentum is fading. Confirm with structure; MACD alone whipsaws in a range.
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What does the MACD indicator measure?
It measures momentum and trend by comparing a fast and a slow moving average. The MACD line, its signal line, and the histogram together show direction and how strong it is.
What is a MACD crossover?
When the MACD line crosses its signal line — above is a bullish signal, below is bearish. Because it is based on moving averages it lags price and confirms rather than predicts.
What is MACD divergence?
When price and the MACD disagree — e.g. price makes a higher high while MACD makes a lower high. It warns that momentum is weakening and a reversal may be near.