Macd

MACD, or Moving Average Convergence Divergence, is a momentum and trend-following indicator used in technical analysis to identify shifts in the strength, direction, and duration of a price trend. It was developed by Gerald Appel in the late 1970s and is commonly applied to the closing prices of a security.

The indicator consists of three components: the MACD line, the signal line, and the histogram. The MACD line is the difference between two exponential moving averages (EMAs) of closing prices, traditionally 12-period and 26-period EMAs. The signal line is the 9-period EMA of the MACD line. The histogram shows the difference between the MACD line and the signal line, highlighting momentum changes.

Interpretation centers on crossovers and position relative to the zero line. A positive MACD value indicates that the short-term EMA is above the long-term EMA, signaling bullish momentum. When the MACD line crosses above the signal line, it is often interpreted as a buy signal; when it crosses below, as a sell signal. The histogram provides a visual measure of the gap between MACD and the signal line and tends to widen during strong moves and narrow as momentum wanes. Crossings of the zero line can also indicate a change in trend.

Settings can be adjusted for sensitivity, with common defaults being 12, 26, and 9, but traders may use alternative periods or apply the indicator to different data series or timeframes. Because MACD is based on averages, it is a lagging indicator and should be used in conjunction with other analysis techniques. It performs best in trending markets and may give false signals in ranges.