Introduction to MACD
Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price.
The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result of that calculation is the MACD line.
The Three Components of MACD
- The MACD Line: The 12-day EMA minus the 26-day EMA. This line reacts quickly to price changes.
- The Signal Line: A 9-day EMA of the MACD Line. This line reacts more slowly and acts as a trigger for buy and sell signals.
- The Histogram: Represents the difference between the MACD Line and the Signal Line. When the MACD line is above the signal line, the histogram is positive.
Trading Signals
Traders use MACD in several ways:
- Signal Line Crossovers: A bullish signal occurs when the MACD line crosses above its signal line. A bearish signal occurs when the MACD line crosses below the signal line.
- Centerline Crossovers: When the MACD line crosses above zero, it indicates that the short-term average is higher than the long-term average, signaling upward momentum.
- Divergence: When the security price diverges from the MACD, it signals the end of the current trend.
MACD in Stock Monitor Pro
Stock Monitor Pro automatically calculates MACD, the Signal Line, and the Histogram for every ticker you scan. Our AI-Assisted Trade Analysis engine specifically looks for "Bullish MACD Crossovers" deep in negative territory as high-probability rebound setups.