Technical Analysis
MACD: Trend and Momentum in One Indicator
MACD combines trend-following and momentum into one indicator — best for confirming trend direction.
Key rules
- MACD = 12 EMA minus 26 EMA; signal line = 9 EMA of MACD
- Bullish cross: MACD line above signal line
- Histogram growing positive = strengthening bullish momentum
- Divergence between MACD and price is more reliable than crossovers
- Not effective in low-volatility ranging markets
MACD is the difference between the 12 and 26-period EMAs. The signal line is a 9-period EMA of the MACD line. When MACD crosses above the signal line it suggests bullish momentum. The histogram shows the gap between them — growing bars indicate strengthening momentum.
Most effective in trending markets alongside price structure. MACD crossovers in ranging markets produce many false signals.