Glossary · Technical Analysis

MACD

An indicator comparing two moving averages to gauge momentum shifts.

MACD (Moving Average Convergence Divergence) subtracts a longer EMA from a shorter EMA and plots that difference as a line, plus a signal line and a histogram of the gap between them. Crosses and histogram expansion/contraction are used to spot momentum shifts.

Like other lagging indicators, MACD can whipsaw in choppy ranges. It tends to be clearer when a market is trending and momentum is building or fading.

Example

The MACD line crosses above its signal line after a pullback, and the histogram turns positive — a classic momentum-turn reading some traders watch for trend continuation entries.