What MACD measures

The Moving Average Convergence Divergence (MACD) measures the distance between two exponential moving averages of price. When that distance grows, momentum is building; when it shrinks, momentum is fading. It is both a trend and a momentum tool in one.

The three components

  • MACD line: the 12-period EMA minus the 26-period EMA. It rises when shorter-term price is pulling away from longer-term price.
  • Signal line: a 9-period EMA of the MACD line, used to smooth it and generate crossover signals.
  • Histogram: the gap between the MACD line and the signal line, drawn as bars. It expands as momentum accelerates and contracts as it stalls.

Reading crossovers and the zero line

A bullish crossover occurs when the MACD line crosses above the signal line; a bearish crossover is the reverse. The zero line adds context: MACD above zero means the short EMA is above the long EMA (broadly bullish), while below zero is broadly bearish. The strongest signals are crossovers that happen in agreement with the zero-line position.

MACD divergence

Like RSI, MACD can diverge from price. If price makes a higher high but the MACD histogram makes a lower high, upside momentum is weakening even as price rises — an early warning of a possible stall or reversal.

Why pair MACD with RSI

MACD and RSI measure momentum differently and are strongest together. RSI is bounded between 0 and 100 and excels at flagging stretched, overbought or oversold conditions; MACD is unbounded and excels at confirming the direction and acceleration of a move. When an RSI extreme on RSI Monitor lines up with a MACD crossover in the same direction, the two are confirming each other rather than guessing alone.