MACD

MACD, short for Moving Average Convergence Divergence, tracks the relationship between two exponential moving averages of price, usually the 12-day and 26-day. The MACD line is the gap between them, a signal line (a 9-day EMA of the MACD line) sits on top, and a histogram plots the distance between the two. Together they fold trend and momentum into one panel.

Traders watch MACD for a few signals:

• Crossovers: the MACD line crossing above its signal line is a bullish trigger, crossing below a bearish one. These are the most-watched MACD signals.
• The zero line: MACD above zero means the faster average is above the slower one (an uptrend), below zero flags a downtrend.
• The histogram: rising bars show momentum building and shrinking bars show it fading, often before the lines actually cross.
• Noise: MACD whipsaws in flat markets, so a crossover means more when it lines up with the broader trend. Acting on every cross is a common mistake.

Imagine the 12-day EMA pulls above the 26-day EMA after a selloff. The MACD line turns up, crosses above its signal line, and the histogram flips from red to green, all hinting that downward momentum has stalled and buyers are stepping in.