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Indicator

MACD

Measure momentum through moving average relationships — a confirmation tool for trend direction, acceleration, and early exhaustion signals.

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Key Takeaways

MACD line equals EMA of 12 periods minus EMA of 26 periods.
Signal line equals EMA of 9 periods applied to MACD.
Histogram equals MACD minus signal.
Captures both trend direction and momentum acceleration or deceleration.
Used to confirm trend alignment and identify momentum shifts.

What It Measures

MACD line equals EMA of 12 periods minus EMA of 26 periods.
Signal line equals EMA of 9 periods applied to MACD.
Histogram equals MACD minus signal.
Captures both trend direction and momentum acceleration or deceleration.

Institutional Use

Used to confirm trend alignment and identify momentum shifts.
Not a standalone signal system.
Most valuable for confirming trend continuation phases and identifying early-stage exhaustion through divergence.

Key Signals

MACD above signal line signals bullish momentum.
Below signals bearish momentum.
Expanding histogram signals increasing momentum.
Contracting histogram signals fading momentum before price reacts.
Divergence means price makes new high while MACD weakens.

Trading Playbook

Trend continuation: enter when MACD crosses above signal in the direction of higher timeframe trend.
Divergence: identify on daily or weekly chart, wait for price structure reversal confirmation before entry.
Exit when histogram contracts significantly.

When Not to Trade

Avoid MACD crossovers in choppy or range-bound markets.
Do not use in isolation without structural and volatility context.