Read the Lines · Momentum
MACD,
trend momentum in three lines and a histogram.
MACD — Moving Average Convergence Divergence — compares faster and slower exponential moving averages to show changes in trend momentum. It usually includes a MACD line, a signal line and a histogram. Every component is derived from historical price, so MACD cannot lead the market it is measuring.
Quick answer
What does MACD tell you?
MACD shows how the relationship between a faster and slower moving average is changing. When the gap widens, trend momentum is strengthening in that direction. When it narrows, momentum is slowing. Crossovers describe changes in that relationship; they do not guarantee a new trend.
What is the MACD line?
The standard MACD line is commonly calculated from the difference between a 12-period EMA and a 26-period EMA. When the faster average pulls above the slower average, the line rises. When it falls below, the line weakens.
What is the signal line?
The signal line is usually a moving average of the MACD line itself. A MACD crossover occurs when the MACD line crosses above or below that signal line.
Because one derived average is crossing another derived average, the signal is inherently delayed.
What does the MACD histogram show?
The histogram visualises the distance between the MACD line and the signal line. Growing bars show the gap widening; shrinking bars show the gap narrowing.
That can make acceleration and deceleration easier to see without changing the underlying information.
Common mistake
MACD crossover does not mean “the trend just started”.
Price normally had to move first to pull the faster average, then the MACD line, then the signal relationship into the crossover. Treat the event as confirmation of changed recent behaviour rather than the market revealing its next chapter.
Important information: This page provides general educational content about technical analysis. It does not provide financial product advice or recommendations.
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