What Is MACD (Moving Average Convergence Divergence)?

MACD shows whether short-term momentum is accelerating or fading relative to the longer trend. Here is how it is built and how to read a crossover sensibly.

What MACD is made of

MACD was developed by Gerald Appel in the late 1970s. It uses three pieces, all derived from exponential moving averages (EMAs):

• MACD line = 12-period EMA − 26-period EMA of the close.
• Signal line = 9-period EMA of the MACD line.
• Histogram = MACD line − signal line.

When the fast EMA pulls away from the slow EMA, the MACD line rises: short-term price is accelerating upward relative to the trend. When it converges back, momentum is fading. That is the "convergence/divergence" in the name.

Reading a bullish crossover

A bullish MACD crossover is when the MACD line moves from below to above the signal line. At the same moment the histogram turns from negative to positive. A bearish crossover is the reverse.

Not all crossovers are equal:

• Below the zero line the crossover is an early, riskier signal that a downtrend may be stabilizing.
• Above the zero line it more often marks a continuation of an existing uptrend.
• With RSI under 60 and price above its 200 EMA there is more room to run than when RSI is already above 70.

The histogram is the early warning

The histogram changes before the lines cross. A histogram that is still negative but shrinking bar by bar means selling momentum is weakening, which is often noticed days before the actual crossover.

Where MACD fails

MACD is built from moving averages, so it lags. In sideways markets it whipsaws, producing crossovers that reverse within days. Treat a crossover as one input: check the trend, the RSI, and whether the move has a reason behind it.

Using MACD with a scanner

The MACD crossover stocks page lists stocks whose histogram flipped positive most recently, with RSI and distance from the 200 EMA beside each, so you can discard weak setups quickly. The full Market Scanner in the app lets you set your own thresholds across 460+ US and TSX stocks.

Open the free scanner (no signup)

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Educational content only, not investment advice. Worked examples use illustrative numbers. See our disclaimer.