MACD Strategy Basics

The Moving Average Convergence Divergence (MACD) indicator tracks the relationship between two moving averages of price, plotted alongside a signal line and a histogram, to help visualize changes in momentum and trend direction.

Core Components

• The MACD line, derived from the difference between two exponential moving averages
• The signal line, a moving average of the MACD line itself
• The histogram, which shows the distance between the MACD line and the signal line

Common Ways It Is Used

A frequently referenced signal is the MACD line crossing above or below the signal line, interpreted as a shift in short-term momentum. Traders also watch for the MACD line crossing above or below the zero line, sometimes read as a broader trend shift, and for divergence between MACD and price as a sign that momentum is not confirming a new high or low.