Momentum oscillators
MACD (Moving Average Convergence Divergence)
MACD is the difference between a fast EMA (12) and a slow EMA (26). A 9-period EMA of that line is the signal line, and the gap between them is drawn as a histogram.
How to read it
- MACD crossing above the signal line shows momentum turning up; crossing below shows it turning down.
- MACD above zero means the 12 EMA is above the 26 EMA (uptrend bias).
- A growing histogram means momentum is increasing; a shrinking one means it is fading.
Settings
Standard 12, 26, 9. Some traders use 8, 21, 5 for faster signals.
Example rule to test
Rule to test: enter when MACD crosses above its signal line while above zero; exit on the opposite cross.
Common mistake
Trading every cross in a sideways market. MACD works best when there is a trend.
Try it free on iTradeChart
For learning only. Backtests use past data and do not guarantee future results. Not investment advice.