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Glossary · Indicators

MACD (Moving Average Convergence Divergence)

A trend-momentum indicator built from the difference between two EMAs (usually 12 and 26), with a 9-period signal line and a histogram.

By Sky Trade editorial teamUpdated

MACD, created by Gerald Appel, has three parts:

  • the MACD line: EMA(12) − EMA(26) of the closing price;
  • the signal line: a 9-period EMA of the MACD line;
  • the histogram: MACD line minus signal line.

When the faster EMA is above the slower one, MACD is positive, which is read as upward momentum. Traders watch crossovers of the MACD and signal lines, crossings of the zero line, and divergence between MACD and price.

Because MACD is made of moving averages, it lags. A crossover confirms a move that has already happened, and in sideways markets the lines cross back and forth, producing a stream of losing signals. That isn't a flaw you can tune away; it is the cost of smoothing.

Another misunderstanding is comparing MACD values across instruments. Its units are price units, so a reading of 0.0005 on EUR/USD and 0.05 on USD/JPY aren't directly comparable.

The Sky Trade terminal includes MACD among its oscillators. Pair it with something that tells you whether the market is trending at all. The detailed walkthrough is MACD explained.

Example

On EUR/USD M5, EMA(12) is 1.08540 and EMA(26) is 1.08510, so MACD = +0.00030. With the signal line at +0.00022, the histogram reads +0.00008: small but positive.

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