The Moving Average Convergence Divergence (MACD) is a momentum indicator built from two exponential moving averages (EMAs). It is popular because it combines two questions in one chart: which way is the trend pointing, and is that move gaining or losing strength?
How it is built
- MACD line: the difference between a fast EMA and a slow EMA of the closing price. The common default is 12 and 26 periods.
- Signal line: an EMA of the MACD line itself, usually over 9 periods.
- Histogram: the distance between the MACD line and the signal line, drawn as bars above or below zero.
When the fast average is above the slow one, the MACD line is positive; when it is below, the line is negative. The further apart the averages are, the larger the value.
What it describes
- Direction: a MACD line above zero means short-term prices have been rising faster than the longer-term average.
- Momentum: a histogram that grows means the gap between the two averages is widening; a shrinking histogram means it is narrowing.
- Crossovers: the MACD line crossing its signal line marks a change in short-term momentum relative to its recent average.
Common misreadings
- Treating every crossover as meaningful. In sideways markets the lines cross often and carry little information.
- Forgetting that it lags. MACD is calculated from moving averages, so it always reacts after price has moved.
- Comparing values across assets. MACD is expressed in price units, so a value of 50 on one asset cannot be compared with 50 on another.
How our apps use it
In Novira Crypto and NBORSA, MACD appears on the detail screen as one of several trend measures with a short description such as “Rising” or “Falling”. No setup is based on MACD alone.
This article is for educational purposes only and does not constitute investment advice.