JustChartsWhat Is MACD? How to Read the MACD Line, Signal Line and Histogram
MACD (Moving Average Convergence Divergence) is a momentum indicator built from the difference between a 12-period and a 26-period exponential moving average. A 9-period EMA of that difference forms the signal line, and the histogram shows the gap between the two. A MACD line crossing above its signal line is read as bullish momentum; crossing below as bearish.
Key facts
- MACD line
- 12-period EMA − 26-period EMA
- Signal line
- 9-period EMA of the MACD line
- Histogram
- MACD line − signal line
- Zero line
- above = short EMA above long EMA
- Created by
- Gerald Appel, late 1970s
The three parts of MACD
- MACD line = 12-period EMA − 26-period EMA. Positive when the short-term average is above the long-term one.
- Signal line = 9-period EMA of the MACD line.
- Histogram = MACD line − signal line. Growing bars mean momentum is accelerating; shrinking bars mean it is fading.
How traders read MACD
| Signal | Interpretation |
|---|---|
| MACD crosses above signal line | Bullish momentum building |
| MACD crosses below signal line | Bearish momentum building |
| MACD above zero | Short-term trend above longer-term trend |
| Histogram shrinking | Momentum slowing — a possible turn ahead |
| Divergence with price | Trend may be weakening |
MACD divergence
If price makes a higher high but MACD makes a lower high, upward momentum is weakening (bearish divergence). A lower low in price with a higher low in MACD is a bullish divergence. As with RSI, divergences can last a long time before price turns.
Limitations
MACD is built from moving averages, so it lags. In sideways markets the lines cross back and forth, producing whipsaws. It has no fixed overbought or oversold levels, because its values depend on the market’s price scale.
Frequently asked questions
What are the best MACD settings?
The standard 12, 26, 9 settings are by far the most used. Faster settings react sooner but give more false signals.
What does MACD crossing zero mean?
The 12-period EMA has crossed the 26-period EMA — the short-term trend has moved above (or below) the longer-term trend.
Is MACD better than RSI?
They measure different things: MACD tracks trend and momentum from moving averages; RSI measures the speed of recent gains versus losses. Many traders use both.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
Add MACD to a live chartThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.