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What is MACD? Reading the MACD line, signal and histogram

An indicator that measures both trend and momentum: crossovers, the zero line, the histogram and MACD divergence.

What MACD is

MACD (Moving Average Convergence Divergence) was developed by Gerald Appel in the late 1970s; the histogram was added by Thomas Aspray in 1986. It shows whether the gap between two EMAs is widening or narrowing, in other words whether a trend is gaining or losing strength.

MACD lineEMA 12 − EMA 26
Signal lineEMA 9 of the MACD line
HistogramMACD − Signal
On TradingViewMACD (12, 26, close, 9)

How to read it

  • MACD crosses above the signal: momentum turning up; crosses below: momentum turning down.
  • Zero line: MACD above 0 means EMA 12 is above EMA 26, the short-term trend is up.
  • A shrinking histogram is an early sign of fading momentum, often before the lines cross.
  • MACD divergence: price makes a higher high while MACD makes a lower high, just like RSI divergence.

How to trade it

  1. Filter the trend: only buy when price is above the EMA 200 (or the higher-timeframe MACD is above 0).
  2. Wait for a pullback that brings MACD back near the zero line without diving deep below it.
  3. Enter when MACD crosses above the signal near zero; stop below the pullback low.
  4. Take partial profit when the histogram shrinks clearly or price reaches resistance.
Watch outMACD is built from moving averages, so it always lags. In a sideways market its crossovers produce a lot of noise.
TipCrossovers far from zero tend to be less reliable than crossovers near zero in the direction of the main trend.

Try it on a chart

Educational content only, not investment advice. Practise on a demo account before using real money.