What is the MACD indicator?
Updated on August 24, 2026 · by Alex
The MACD (moving average convergence divergence) compares two averages of the price — a fast one and a slow one — to detect when a trend is gaining or losing strength. It is made up of a main line, a signal line and a histogram.
The classic reading is the crossover: when the MACD line crosses above the signal line it is read as bullish momentum, and below it as bearish. The MACD line crossing zero means the fast average has moved above or below the slow one.
As with the RSI, the thing most often cited by the people who use it is divergence: the price making higher and higher highs while the MACD makes lower and lower ones usually says the move is running out of strength.
Forgetting that it arrives late by construction. The MACD is calculated from averages, and an average always looks backward. By the time it marks a crossover, a good part of the move has already happened. That is not a flaw in the implementation: it is simply what the indicator is.
The other well-known problem is that in sideways markets it gives a lot of false signals. When the price swings without direction, the two lines cross over and over again, and every crossing looks like a signal. Anyone who trades all of those crossings ends up paying commissions without earning anything.
Like any technical indicator, it describes the behavior of the price; it says absolutely nothing about whether the business behind it is worth what it costs.
