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.