A trend-following momentum indicator built from the difference between two exponential moving averages, with a signal line and histogram to show momentum shifts.
MACD is calculated by subtracting a 26-period EMA from a 12-period EMA. A 9-period EMA of that result - the signal line - is then plotted alongside. The histogram shows the gap between MACD and its signal line, expanding when momentum is strong and contracting as it fades.
Traders look for three primary signals: crossovers (when MACD crosses above the signal line, momentum is turning bullish), zero-line crosses (MACD moving from negative to positive confirms a trend change), and divergence (price making new highs while MACD makes lower highs warns of weakening momentum).
Because MACD is derived from moving averages it is inherently a lagging indicator, better suited to confirming trends than timing precise entries. It works best on daily and higher timeframes where noise is reduced.
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