What is the MACD Indicator?

MACD is a momentum indicator comparing two moving averages of price, one fast and one slow, to show whether a trend is gaining or losing steam. Its most-watched event is the crossover: the MACD line crossing above its signal line reads as momentum turning up, crossing below as turning down.

MACD is built from three parts, all derived from price averages. The MACD line subtracts the 26-day average from the 12-day average, both weighted toward recent days, so a positive number means recent prices sit above older ones and a wider gap means a faster move. The signal line is a 9-day average of the MACD line itself, trailing behind it. The histogram is a set of bars showing the distance between those two lines. Reading it: the MACD line crossing above the signal line says momentum has turned up and crossing below says it has turned down, while the histogram gives earlier notice, because its bars shrink as a move fades. Two honest warnings: everything here is math on past prices, so MACD reacts after a move has already begun, and in a flat market the lines cross constantly and the signals are mostly noise.

A sprinter and a jogger running the same route — recent prices and older prices — with MACD tracking the gap between them. A widening gap means the move is accelerating and a narrowing one means it's tiring. The moment the sprinter falls behind the jogger, the crossover, is when everyone watching the race takes notice.