Trends/Momentum oscillators

MACD

The gap between a fast and a slow moving average, with a smoothed signal line of its own.

Momentum oscillatorsBest on 3M, 6M, 1YAlso called moving average convergence divergence

Illustration of the MACD shape. It is a sketch, not real price data.

What it shows

Gerald Appel's MACD subtracts the 26-bar EMA from the 12-bar EMA. When the fast average is above the slow one, MACD is positive. A 9-bar EMA of MACD is the signal line.

The zero line is where the two averages cross. The distance between MACD and the signal line is shown as a histogram.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

MACD line = EMA(12) − EMA(26) of the close.
Signal line = EMA(9) of the MACD line.
Histogram = MACD − signal.
Plot all three under the price.

Starting values: Fast 12; Slow 26; Signal 9. These are proposed and will be tuned on real price data before launch.

How to read it

Blue line is MACD. Gold line is the signal.
Bars show the gap between them.
The dashed line is zero.

Status labels you may see

Label	What it means
MACD above signal	MACD line is above the signal line.
MACD below signal	MACD line is below the signal line.
Just crossed	The lines crossed in the last 3 bars.

What cancels it

A cross of MACD and signal flips the state.

What traders check next

Whether MACD is above or below zero.
The height of the histogram.
How often crosses happened in the recent past.

Limits

Lagging, because it uses averages.
Many crosses in sideways markets.
Different settings give different results.

Try it in forecastviz

Open any ticker and choose Momentum oscillators → MACD in the left menu.
Switch between 3M, 6M, 1Y to see how the picture changes.
Compare with MACD histogram and MACD divergence on the same chart.

Open on a ticker

Questions

What does the zero line mean?

The fast and slow averages are equal.

Why 12, 26, 9?

They are Appel's standard settings.