MACD explained simply
The MACD line, signal line and histogram, and how to read momentum shifts.
MACD (Moving Average Convergence Divergence) shows the gap between a fast EMA (12) and a slow EMA (26). When the gap grows, momentum is increasing.
The three parts
- MACD line: 12 EMA minus 26 EMA.
- Signal line: a 9-period EMA of the MACD line.
- Histogram: the distance between the two. Growing bars = momentum building; shrinking bars = momentum fading.
How to use it
Zero line: MACD above zero means the short-term average is above the long-term one, a bullish backdrop. Below zero is bearish.
Crossovers: MACD crossing above its signal line is a bullish momentum shift. Crossovers in the direction of the higher-timeframe trend work far better than counter-trend ones.
Divergence: like RSI, if price makes a new high but MACD does not, momentum is weakening.
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Educational content only, not financial advice. Trading involves risk of loss.