What is MACD?
MACD (Moving Average Convergence Divergence) is the difference between a fast and a slow exponential moving average, usually 12 and 26 periods, plotted against a 9-period average of itself called the signal line.
How it works
Gerald Appel developed it. The MACD line is the 12-period EMA minus the 26-period EMA. The signal line is a 9-period EMA of the MACD line, and the histogram is the gap between the two. A MACD line crossing above its signal line is read as bullish momentum and a cross below as bearish.
What it can't tell you
Because it is built from moving averages it lags price, and in a sideways market it crosses back and forth and produces a run of small losing signals.
How Tickfloor uses it
MACD(12, 26, 9) is one of the ten inputs to Tickfloor's agreement score.
Does it work as a strategy?
Tickfloor backtested 1 rule that use MACD, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use MACD, and a historical diagnostic, not validation under Testing Standard v2.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 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.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is MACD?
MACD (Moving Average Convergence Divergence) is the difference between a fast and a slow exponential moving average, usually 12 and 26 periods, plotted against a 9-period average of itself called the signal line.
How does MACD work?
Gerald Appel developed it. The MACD line is the 12-period EMA minus the 26-period EMA. The signal line is a 9-period EMA of the MACD line, and the histogram is the gap between the two. A MACD line crossing above its signal line is read as bullish momentum and a cross below as bearish.
Does MACD work as a strategy?
Tickfloor backtested 1 rule that use MACD, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use MACD, and a historical diagnostic, not validation under Testing Standard v2.
What are the limits of MACD?
Because it is built from moving averages it lags price, and in a sideways market it crosses back and forth and produces a run of small losing signals.
How does Tickfloor use MACD?
MACD(12, 26, 9) is one of the ten inputs to Tickfloor's agreement score.