Macd

Family VI · Charts & indicators

Not to be confused with rsi.

MACD stands for moving average convergence divergence, an oscillator built from two exponential moving averages (EMAs) of an asset's closing price. The indicator consists of the MACD line, a signal line (an EMA of the MACD line), and a histogram that shows the gap between the two. It is used to gauge the direction, strength and turning points of a trend.

Calculation

The standard construction uses a 12-period EMA and a 26-period EMA of the close. The MACD line is the 12-period EMA minus the 26-period EMA. The signal line is a 9-period EMA of the MACD line. The histogram is the MACD line minus the signal line. These periods are conventions, not rules; charting software and traders often change them, and shorter periods make the indicator more responsive while longer periods make it smoother.

Worked example

A positive histogram means the MACD line is above its signal line; a negative histogram means it is below. Crossovers of the two lines are often watched, but they can occur frequently in choppy markets and produce false signals.

Interpretation and caveats

Traders read MACD in several ways: line crossovers, centreline crossings (MACD above or below zero), and divergence between price and the indicator. Because it is based on moving averages, MACD lags price and can whipsaw in ranging conditions. It is also sensitive to the chosen periods and to the timeframe of the chart. No single reading is universally reliable, and the indicator is typically combined with other analysis.

Often confused with

rsi

RSI is a bounded oscillator that measures the speed and magnitude of recent price changes on a 0–100 scale, whereas MACD is unbounded and compares two moving averages; the visible sign is that RSI has fixed 30 and 70 reference lines while MACD has no upper or lower limit.

See also

• forex technical analysis indicators
• price action
• fundamental analysis
• support and resistance
• technical analysis
• fibonacci