MACD turns two moving averages into a momentum oscillator. It subtracts a 26-period EMA from a 12-period EMA to create the MACD line, then plots a 9-period EMA of that as the signal line. The result shows you when momentum is accelerating or decelerating.
MACD Line = 12 EMA − 26 EMA
Signal Line = 9 EMA of MACD Line
Histogram = MACD Line − Signal LineThe Three Components
- ▸MACD line (12–26 EMA): oscillates above and below zero — the raw momentum reading.
- ▸Signal line (9 EMA of MACD): the smoothed version — crossovers with the MACD line are signals.
- ▸Histogram: bars showing the gap between MACD and signal — visualizes momentum strength.
The Zero Line: Trend Direction
When the MACD line is above zero, the short-term EMA is above the long-term EMA — the trend is up. Below zero, the trend is down. The zero-line crossover is a trend-change signal, but it's lagging.
The Crossover Signal
When the MACD line crosses above the signal line, momentum is turning bullish — a buy signal. When it crosses below, momentum is turning bearish — a sell. The histogram makes this visual: bars flip from red to green (or shrink/grow).
In a sideways market, MACD crossovers fire constantly and most are false. Use MACD crossovers only when there's a clear trend — in ranges, they'll bleed your account.
MACD Divergence
Like RSI, MACD divergence is the strongest signal. When price makes a new high but MACD makes a lower high, the uptrend is losing momentum. The same applies inverted for bottoms.
Putting It Together
MACD works best as part of a system, not alone. A common setup: price above the 200 EMA (long-term uptrend) → wait for pullback → MACD crosses back above signal (momentum returning) → enter long. Each piece confirms the next.
Toggle MACD in the indicators panel. The histogram makes momentum shifts immediately visible — shrinking bars tell you momentum is fading before the crossover fires.