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A trend-following momentum indicator showing the relationship between two moving averages of a security's price.
MACD is calculated by subtracting the 26-period EMA from the 12-period EMA. The result is the MACD line. A 9-period EMA of the MACD line is the signal line. Crossovers of these lines generate buy/sell signals. When MACD crosses above the signal line, it's bullish; when it crosses below, it's bearish. The MACD histogram shows the distance between the MACD line and the signal line, helping traders identify momentum shifts. MACD works best in trending markets and can produce false signals in range-bound conditions.