What it is
MACD stands for moving average convergence divergence. Gerald Appel built it in the late 1970s. It follows the gap between a fast and a slow average of the price, so it shows when a move is gaining or losing pace.
How it is calculated
The MACD line is the 12-day exponential moving average of the close minus the 26-day one. The signal line is a 9-day exponential average of the MACD line itself. The histogram is the MACD line minus the signal line, drawn as bars above and below zero. Those three settings are the (12, 26, 9) printed beside the name.
How traders read it
When the MACD line crosses above its signal line, the gap between the two averages has started to widen faster than it did over the last nine days. A cross below means the reverse. A MACD line above zero means the 12-day average is above the 26-day; below zero, under it.
MACD is built from averages, so it lags the price: a cross confirms a change in pace after it has begun. In a sideways market the two lines cross back and forth often, and traders usually read a cross together with the trend it happens in.
MACD on Breakaway
Every public stock page shows whether MACD is above or below its signal line, and how many sessions ago it last crossed. Members can get an alert when MACD crosses above its signal line on a stock they follow. MACD does not count toward the Quality Score: in our tests on 20 years of daily prices, adding it did not improve the score.