Article · 2 min read
What Is the MACD Indicator? How to Read the Signal Line and Histogram
What MACD is, what the 12-26-9 setting means, and how to read crossovers and the histogram. Common mistakes and limits when using MACD on stocks, gold and crypto.
MACD (Moving Average Convergence Divergence) is an indicator that follows the difference between two exponential moving averages to show the direction and strength of a trend. It is widely used on stock, gold, crypto and currency charts.
How is it calculated?
- MACD line = 12-period EMA − 26-period EMA
- Signal line = 9-period EMA of the MACD line
- Histogram = MACD line − signal line
"12-26-9" is the most common setting. An EMA (exponential moving average) gives more weight to recent prices, so it reacts faster than a simple average.
How is it read?
- When the MACD crosses above the signal line, momentum is said to be turning up; below, turning down.
- A positive histogram means the MACD is above the signal (rising momentum), a negative one below it.
- The zero line: with the MACD above zero, the short average is above the long average, so the tendency is up.
Its limits
- It lags. It is derived from moving averages, so the signal comes after the move has started.
- It gives many false signals in sideways markets. When the price moves back and forth in a range, the MACD keeps crossing.
- It is not enough alone. Read it with volume, the RSI and the main trend. See the RSI guide.
- Costs change the result. If you trade every crossover, commission and slippage add up; a backtest that ignores them is too optimistic.
A live example
On the Market Analysis page the MACD state (positive or negative) of the tracked assets is listed with the RSI and volume. It is a description, not a recommendation.
To try a rule like the MACD with real costs, use the Strategy Lab.
This article is educational and not investment advice. Past results do not guarantee future results.