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Intermediate · Lesson 5 of 9MACD
MACD (Moving Average Convergence Divergence), developed by Gerald Appel, is the 12-period EMA minus the 26-period EMA. A 9-period EMA of the MACD is the signal line, and the histogram is MACD minus the signal line.
Common readings: MACD crossing above its signal line suggests improving momentum; crossing below suggests weakening. MACD above zero means the short-term average is above the long-term average, consistent with an uptrend. Divergences work as with RSI.
MACD is still built from moving averages, so it lags. Combine it with trend and support/resistance rather than trading every crossover.
Formula
MACD = EMA12 - EMA26 Signal = EMA9(MACD) Histogram = MACD - Signal
Key takeaways
- MACD = EMA12 - EMA26; signal = EMA9 of MACD.
- Crossovers and zero-line crosses show momentum shifts.
- It lags; use it as confirmation.
Check your understanding
1. MACD is calculated as...
- 50-day minus 200-day SMA
- 12-period EMA minus 26-period EMA
- RSI minus 50
- Price minus volume
Show the answer
12-period EMA minus 26-period EMA. Standard settings are 12, 26 and 9.
2. The MACD histogram shows...
- Volume
- MACD minus its signal line
- Dividend history
- Price
Show the answer
MACD minus its signal line. It visualises the gap between MACD and the signal line.
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