Technical Analysis

MACD — Definition & Example

Moving Average Convergence Divergence — a trend-following momentum indicator using two moving averages.

MACD plots the difference between a fast EMA (typically 12-period) and a slow EMA (26-period), with a signal line (9-period EMA of MACD) overlaid. Bullish crossovers (MACD above signal line) suggest upward momentum; bearish crossovers, downward. The histogram shows the gap between MACD and signal — useful for spotting momentum shifts before crossovers complete. Like RSI, divergence between MACD and price is a powerful reversal signal.

Formula

MACD = EMA(12) − EMA(26); Signal = EMA(9) of MACD; Histogram = MACD − Signal

Example

A stock's MACD line crosses above its signal line while the histogram flips positive after weeks of being negative. This bullish crossover often precedes a multi-day uptrend.

Related

RSI (Relative Strength Index)Moving AverageEMA (Exponential Moving Average)Confirmation Bias

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