Skip to main content

Moving Average Convergence/Divergence (MACD)

The Moving Average Convergence/Divergence is a momentum oscillator indicator used to identify the trend and momentum of an asset or stock. The indicator consists of two lines, the MACD Line, Signal Line, and a histogram. 

This indicator is used to identify the convergence and divergence of the two lines. Convergence is when the two lines are close, and divergence is when the two lines are far away. Crossovers are a common use for this indicator. When the shorter line (MACD line) crosses over the long line (signal line), the momentum upwards increases, and the opposite is true for momentum downwards. Another significant crossover is when the MACD line crosses over the 0 line, indicating that the momentum is heading upwards when going from negative to positive or downwards when going from positive to negative.

macd.png

Moving Average Convergence/Divergence Formula

MACD Line: (12-day EMA - 26-day EMA)

Signal Line: 9-day EMA of MACD Line

MACD Histogram: MACD Line - Signal Line

Formula Source: StockCharts

For more information (also the source) visit: StockCharts