MACD
Moving Average Convergence Divergence — a trend-following momentum indicator built on two EMAs.
Definition
MACD, developed by Gerald Appel in the late 1970s, is the difference between two exponential moving averages of price. A signal line (EMA of the MACD itself) generates trade signals when crossed. The MACD histogram (MACD minus signal line) helps visualise momentum strength. Signals are most reliable on the daily and weekly timeframes. MACD lags by definition (it is built on moving averages) but is excellent at filtering noise and confirming trends.
Formula
MACD = EMA(close, 12) - EMA(close, 26)
Signal = EMA(MACD, 9)
Histogram = MACD - Signal
Buy signal: MACD crosses above Signal
Sell signal: MACD crosses below SignalWorked example
On a chart of SPY, the 12-day EMA is $510 and the 26-day EMA is $505. MACD = +5. Five days ago MACD was -2, and yesterday the 9-day signal line crossed from above to below MACD — a bullish crossover, often used to confirm a trend resumption.
How ARIA Analyst uses it
ARIA computes MACD on daily, 4-hour and weekly bars and combines it with ADX to filter signals in choppy markets.
Related terms
Exponential Moving Average (EMA)
A moving average that weights recent prices more heavily — faster than the SMA.
Relative Strength Index (RSI)
A 0-100 momentum oscillator measuring the speed and magnitude of recent price changes.
ADX
Average Directional Index — measures trend strength from 0 to 100 without indicating direction.
Bollinger Bands
A volatility envelope: 20-period moving average plus and minus two standard deviations.
See MACD in action on any asset
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