MACD explained: crossovers & histogram
MACD plots the distance between two moving averages, capturing both trend direction and momentum. It has three parts: the MACD line, the signal line, and the histogram.
The three components
- MACD line: short EMA minus long EMA — the fast one;
- Signal line: a smoothed MACD line — the slow one;
- Histogram: MACD minus signal — the gap between them, made visible.
Crossovers and the zero line
A bullish crossover (MACD crosses above signal) leans long; a bearish crossover leans short. Read them against the zero line: both lines above zero = bullish regime, below = bearish. A bullish cross above zero is generally more trustworthy than one below.
Histogram and divergence
Shrinking bars mean momentum is fading even while price still climbs — which is also how you spot divergence: price makes a new high but MACD/histogram doesn't. As with RSI, divergence matters most at key levels.
Key takeaways
- MACD = fast line + signal line + histogram.
- Crossovers give bias; the zero line gives regime.
- A shrinking histogram warns of fading momentum; divergence flags reversals.
Put MACD under a moving-average chart and trends get obvious.
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