The three parts
| Part | Formula |
|---|---|
| MACD line | 12-day EMA - 26-day EMA |
| Signal line | 9-day EMA of the MACD line |
| Histogram | MACD line - signal line |
When the short EMA is above the long one, MACD is positive: recent prices are rising faster than the longer trend.
Reading it
- Bullish crossover: MACD crosses above the signal line.
- Bearish crossover: MACD crosses below the signal line.
- Zero line: MACD above zero means the short-term trend is up.
- Histogram: growing bars mean momentum is strengthening; shrinking bars mean it is fading.
- Divergence: price makes a new high but MACD does not. Momentum may be weakening.
Limits
MACD is built from lagging averages, so crossovers arrive after moves have begun. In sideways markets it produces many whipsaws. Like every price indicator, it says nothing about the company. See Fundamentals vs technicals.
See also
- Exponential moving average (EMA) How the exponential moving average weights recent prices more heavily than a simple average, how to calculate it, and when traders prefer it.
- Momentum investing What price momentum is, the evidence that recent winners tend to keep winning for a while, how momentum is measured, and its crash risk.
- Relative Strength Index (RSI) What the RSI indicator measures, how the 14-day RSI is calculated, what overbought and oversold readings mean, and the limits of using it alone.
Pages that link here: Fundamentals vs technicals
Last updated September 30, 2026. Education only, not investment advice.