MACD

MACD, which stands for moving average convergence divergence, is a trend and momentum indicator created by Gerald Appel in the late 1970s. It is calculated by subtracting a longer exponential moving average from a shorter one, typically the 26-period EMA from the 12-period EMA. That result is the MACD line.

A 9-period EMA of the MACD line is drawn as the signal line, and the difference between the two is shown as a histogram. When the MACD line crosses above the signal line, traders read it as bullish momentum; crossing below is read as bearish. The histogram shrinking towards zero suggests momentum is fading.

MACD is popular because it combines trend direction and momentum in one chart, but it is a lagging indicator built from past prices. In choppy, range-bound markets it produces frequent false crossovers. Many traders use it alongside RSI, volume and support and resistance rather than on its own.