MACD

Technical Analysis

The Moving Average Convergence Divergence indicator tracks the relationship between two moving averages to signal momentum shifts and trend changes.

What is MACD?

MACD (Moving Average Convergence Divergence), developed by Gerald Appel, is a trend-following momentum indicator built from moving averages. It shows the relationship between two exponential moving averages (EMAs) of price and is displayed below the main chart as two lines plus a histogram.

How it’s calculated

The standard MACD uses three settings — 12, 26, and 9:

MACD line = 12-period EMA − 26-period EMA.
Signal line = 9-period EMA of the MACD line itself.
Histogram = MACD line − Signal line, plotted as bars showing the gap between the two lines.

When the 12-period EMA is above the 26-period EMA, the MACD line sits above zero, reflecting upward momentum; when it’s below, momentum is downward.

Reading MACD signals

Signal line crossovers — when the MACD line crosses above the signal line, it’s often read as a bullish signal; crossing below is often read as bearish.
Zero-line crossovers — the MACD line crossing above zero suggests the shorter EMA has overtaken the longer one, often confirming a broader shift toward an uptrend (and vice versa below zero).
Divergence — if price makes a new high but the MACD makes a lower high (or the reverse for lows), it can flag weakening momentum ahead of a possible reversal, similar to RSI divergence.

Example

If gold has been trending higher and its MACD line crosses below the signal line while the histogram starts shrinking, a trader watching momentum might see this as an early warning that the rally is losing steam, even though price itself hasn’t reversed yet.

Why it matters

MACD combines trend and momentum information in one indicator, making it popular for confirming trend strength, spotting potential turning points, and filtering trade signals from other tools. Like all lagging, moving-average-based indicators, MACD can produce false or delayed signals in choppy or ranging markets, so it is best used alongside price action, support/resistance, and solid risk management rather than as a standalone signal.