Glossary
MACD
Moving average convergence divergence: the 12-period EMA minus the 26-period EMA, with a 9-period signal line.
On this page
MACD, short for moving average convergence divergence, is a trend-following momentum indicator created by Gerald Appel in the late 1970s. It measures the gap between a fast and a slow exponential moving average of price. When the gap widens, momentum is building in that direction; when it narrows, the trend is losing steam. Its standard settings are 12, 26 and 9 periods.
How it is calculated
Because MACD is measured in price units, a reading of 1.50 means something different for a $20 stock than for a $500 one. Compare a stock's MACD with its own history, not with another stock's.
How traders read it
- Signal-line crossovers: MACD crossing above its signal line is read as bullish, below as bearish.
- Zero-line crossovers: MACD turning positive means the 12-day EMA has moved above the 26-day EMA.
- Divergence: price makes a new high while MACD makes a lower high, hinting that momentum is fading.
The main weakness is lag. Built from moving averages of moving averages, MACD confirms turns after they start and produces repeated false crossovers in sideways markets. The full indicator page covers settings, failure modes and how Finabase charts it.