Alphawick
momentumintermediate

Moving Average Convergence Divergence

MACD

MACD is a trend-following momentum indicator that shows the relationship between two exponential moving averages (EMAs). It consists of the MACD line (12 EMA minus 26 EMA), a signal line (9 EMA of MACD), and a histogram showing the difference between them.

Interactive Chart

3.38
MACD

Parameters

Period for the fast EMA. Standard is 12.

Period for the slow EMA. Standard is 26.

Period for the signal line EMA. Standard is 9.

Quick Answer

Shows relationship between two moving averages of price. ![MACD indicator chart](https://images.unsplash.com/photo-1642790106117-e829e14a795f?w=800 "MACD showing trend momentum") MACD was created by Gerald Appel in the late 1970s. It reveals changes in strength, direction, momentum, and duration of a trend.

Trading Signals

Bullish Crossover

Bullish

MACD line crosses above signal line

MACD > Signal

Bearish Crossover

Bearish

MACD line crosses below signal line

MACD < Signal

Zero Line Cross Up

Bullish

MACD crosses above zero line, confirming uptrend

MACD > 0

Zero Line Cross Down

Bearish

MACD crosses below zero line, confirming downtrend

MACD < 0

What is MACD?

MACD indicator chart
MACD showing trend momentum

MACD was created by Gerald Appel in the late 1970s. It reveals changes in strength, direction, momentum, and duration of a trend. The indicator is unbounded (no fixed range), making it useful for identifying trend direction and momentum rather than overbought/oversold conditions.

MACD Components

The MACD has three components:

Note

1) MACD Line (blue) - the 12 EMA minus 26 EMA 2) Signal Line (orange) - 9 EMA of the MACD line 3) Histogram - visual representation of the distance between MACD and Signal line

When MACD is above signal, histogram is positive (green).

Trading Signals

Primary signals include: Signal line crossovers (MACD crossing signal line), centerline crossovers (MACD crossing zero), and divergences.

Pro Tip

Histogram analysis shows momentum strength - shrinking histogram suggests trend wtrending before the actual crossover occurs.

Trading Strategies

Wait for MACD to cross above the signal line while both are below zero for a strong buy signal. For sells, MACD crossing below signal while both above zero.

Pro Tip

The histogram can signal early entry/exit as it shows momentum before line crossovers.

Formula

Formula
MACD Line = 12 EMA - 26 EMA
Signal Line = 9 EMA of MACD Line
Histogram = MACD Line - Signal Line

Tips & Common Mistakes

Pro Tips

  • •Use histogram for early signals before line crossovers
  • •Stronger signals occur below zero for buys, above zero for sells
  • •Look for divergences between MACD and price
  • •Combine with trend analysis for context

Common Mistakes

  • •Acting on every crossover without considering trend
  • •Ignoring histogram momentum warnings
  • •Using MACD alone for entry and exit
  • •Not waiting for confirmation of signals

Best Used With

RSIVolumeSupport/Resistance
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