What is MACD?
The Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages. It consists of three components: the MACD line (12 EMA minus 26 EMA), the Signal line (9 EMA of the MACD line), and the Histogram (difference between MACD and Signal).
How to Read MACD
Bullish Signal: When the MACD line crosses ABOVE the Signal line, it indicates upward momentum. The histogram bars turn positive (above the zero line) and grow. This is a buy signal.
Bearish Signal: When the MACD line crosses BELOW the Signal line, it indicates downward momentum. Histogram bars turn negative. This is a sell signal.
MACD Divergence: Like RSI divergence, when price makes a new high but MACD makes a lower high, it warns of weakening momentum. This is one of the most reliable reversal signals in technical analysis.
MACD + RSI Combo Strategy
Using MACD and RSI together creates a powerful confirmation system. Look for MACD bullish crossover when RSI is below 40 (not quite oversold but showing weakness). This combination filters out many false signals that either indicator alone would give. Add Fibonacci levels for entry precision.
Our indicator mastery course covers MACD strategies in depth.