MACD

What it measures

The gap between a fast (12-period) and slow (26-period) exponential moving average, plus a 9-period signal line of that gap - a trend-following momentum indicator.

Formula

MACD Line = EMA(12) - EMA(26); Signal Line = EMA(9) of the MACD Line; Histogram = MACD Line - Signal Line

Normal range

Centers around zero. A MACD line crossing above its signal line is conventionally read as bullish momentum, below as bearish.

How it fails

MACD is a lagging indicator built entirely from moving averages of past price - it confirms a trend that has already partly happened rather than predicting a new one, and produces frequent false crossovers in a choppy, range-bound market.

Related metrics

RSI, Bollinger Bands

Bull read

A bullish crossover (MACD above signal) alongside a rising histogram suggests strengthening upward momentum.

Bear read

MACD crossovers lag price - by the time a crossover confirms, a meaningful part of the move it's "confirming" has often already happened.