MACD plots the difference between a 12-period and 26-period exponential moving average (the MACD line), alongside a 9-period EMA of that line (the signal line). The histogram shows the gap between the two. When the MACD line crosses above the signal line, momentum has turned more bullish; crossing below signals the reverse. MACD divergence — price and MACD moving in opposite directions — is treated as an early warning of a stalling trend.
The formula
EMA(12)−EMA(26)
= MACD Line
Why it matters
- —Captures both trend direction and the rate of change in that trend — a rising histogram means momentum is accelerating, not just present.
- —The zero-line crossover (MACD line crossing above or below zero) is considered a more significant trend-change signal than a simple MACD/signal-line crossover.
- —Like RSI, MACD divergence from price is widely watched as an early warning that a trend's momentum is fading before the price itself confirms it.
How to read it
| MACD line above signal line | Bullish momentum |
| MACD line below signal line | Bearish momentum |
| Histogram shrinking toward zero | Momentum fading — potential reversal warning |