What is MACD? The momentum indicator that tracks moving average convergence

MACD (Moving Average Convergence Divergence) is a momentum indicator calculated from the gap between two exponential moving averages of price — fast (12 periods) and slow (26). When the gap widens, momentum strengthens; when it narrows, the move is losing strength.

Alongside the MACD line, a "signal line" is drawn (9-period average of the MACD itself), and the histogram shows the distance between them. Together, the three components give a complete picture of momentum.

The three common signals

• Signal line crossover: MACD crosses above the signal line = momentum is renewing; crosses below = weakening. This is the most common signal, and also the noisiest in a choppy market.
• Zero line crossover: MACD above zero = the fast average is above the slow one, meaning an uptrend environment; below zero = the opposite. The zero crossover is slower but more stable.
• Divergence: As withRSI — a new price high without a new MACD high suggests the move is aging.

The built-in weakness: lag

MACD is built from averages — and therefore it lags by nature. By the time the crossover appears, part of the move has already happened. In a choppy market it produces false crossovers at a frustrating pace; in a trending market it excels at identifying the renewal of momentum after a correction.

The practical conclusion: MACD confirmsrather than predicts. It's used to confirm an entry based on price itself (a breakout, pattern, level) — not to conjure a trade out of thin air.