MACD: Trend And Momentum Together

MACD (moving average convergence divergence) combines two exponential moving averages into one indicator, giving a view of both trend direction and momentum shifts in a single tool.

The Three Parts Of MACD

The MACD line is the difference between a faster and a slower EMA. The signal line is itself a moving average of the MACD line, smoothing it further. The histogram shows the gap between the MACD line and the signal line, visually representing momentum building or fading.

• A MACD line crossing above the signal line is commonly read as a bullish momentum shift; crossing below is read as bearish
• A shrinking histogram, even while price keeps moving in the same direction, can signal that momentum is fading before price itself turns
• MACD divergence — price making a new extreme that MACD does not confirm — is often treated as a more meaningful signal than a simple crossover