MACD: The Trend-Following Momentum Indicator That Combines Two EMA Crossovers

Moving Average Convergence Divergence (MACD) was developed by Gerald Appel in the late 1970s and is one of the simplest and most effective momentum indicators available.

**Construction**

MACD = EMA(12) − EMA(26)

This gives you the MACD line — the difference between a fast and slow exponential moving average. When the 12-period EMA is above the 26-period EMA, MACD is positive (bullish). When below, it is negative (bearish).

Signal Line = EMA(9) of MACD

MACD Histogram = MACD − Signal Line

**Reading the signals**

1. **MACD crossing above the signal line** → bullish crossover, potential buy signal
2. **MACD crossing below the signal line** → bearish crossover, potential sell signal
3. **Histogram above zero** → momentum is bullish
4. **Histogram crossing from negative to positive** → momentum shifting bullish
5. **MACD diverging from price** → one of the most powerful signals; if price makes a new low but MACD makes a higher low, bearish momentum is exhausting

**Zero-line crossovers**

When MACD crosses above zero, the 12-period EMA has crossed above the 26-period EMA — a trend change confirmation. These signals are slower than signal-line crossovers but more reliable.

**MACD in our TA engine**

Our system displays MACD, Signal Line, and Histogram for every asset. In the signal-scoring model, a positive histogram contributes +1 to the oscillator score; negative contributes -1. Combined with RSI, Stochastic, CCI and Williams %R, this drives the overall Buy/Sell signal.