What is MACD in trading?
In one line: MACD (Moving Average Convergence Divergence) is the gap between a fast and a slow moving average, used to see a trend's direction and strength.
A simple example
MACD is built from 3 parts. The usual settings are 12, 26 and 9.
- The MACD line: the 12-candle average minus the 26-candle average. Both are exponential averages, which weigh recent prices more.
- The signal line: a 9-candle average of the MACD line itself.
- The histogram: the bars showing the gap between those two lines.
Say the 12-candle average is 105.40 and the 26-candle average is 104.10. The MACD line is 105.40 − 104.10 = 1.30. If the signal line is at 0.90, the histogram bar is 1.30 − 0.90 = 0.40.
What it tells you
- MACD above zero: the fast average is above the slow one. Recent prices are higher than older ones.
- MACD below zero: the reverse.
- Histogram bars growing: the move is picking up speed.
- Histogram bars shrinking: the move is slowing down.
A "crossover" is when the MACD line crosses the signal line. Many people watch it as a sign the push may be changing.
Why it matters
MACD packs a Trend and its speed into one panel. It can help you see when a strong move starts to fade. Our step-by-step guide is MACD explained.
It's built from the Moving average, so it shares the same delay. It always reacts after price does.
A common mistake
Trading every crossover. In a sideways market, the two lines cross again and again. Each cross looks like a signal, but price goes nowhere.
Check the chart first. Is there a clear trend, with Higher highs and higher lows? A crossover means much more inside a trend than in a choppy range.
Questions
What do 12, 26 and 9 mean in MACD?
12 and 26 are the lengths of the fast and slow averages. 9 is the length of the signal line, the average of MACD itself.
Is MACD better than RSI?
They measure different things. MACD tracks the gap between two averages. RSI compares up moves with down moves on a 0–100 scale. Neither one predicts price.
What is MACD divergence?
It's when price makes a new high but MACD makes a lower high, or the reverse at lows. It hints the move is losing strength, not that it will turn.
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