MACD

MACD (moving average convergence divergence) measures the gap between a fast and a slow exponential moving average, plus a smoothed signal line of that gap.

How MACD is calculated

MACD line = EMA(12) - EMA(26) of the close. Signal line = EMA(9) of the MACD line. Histogram = MACD line - signal line. The default 12, 26, 9 comes from Gerald Appel, and the numbers are settings, not constants of nature.

How it is read

A MACD line crossing above its signal line is read as strengthening momentum, and below as weakening. A zero-line cross means the two EMAs have crossed. Divergence is when price makes a new high and MACD does not.

Common mistakes

• Treating a histogram flip as a trade signal in a sideways market, where it flips constantly.
• Using it on price levels that differ widely, then comparing raw MACD values between assets. The scale follows the price.
• Reading divergence in hindsight. Many divergences appear before the trend carries on.

What Tickfloor tested

Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.

• MACD Crossover (claim test)
• MACD + RSI Confluence (claim test)

Lessons that cover it

• Moving averages, RSI and MACD: what the lines calculate

• Short definition in the glossary

Related concepts

• Exponential moving average (EMA)
• Relative Strength Index (RSI)
• Moving average crossover
• Momentum
• All concepts

General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.

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