Definition
MACD
MACD (Moving Average Convergence Divergence) is a momentum indicator built from the difference between two moving averages.
MACD plots the gap between the 12-period and 26-period exponential moving averages as the MACD line, with a 9-period EMA of that line as the signal line, and the difference shown as a histogram. A bullish crossover (MACD above signal) hints at upward momentum; a bearish crossover hints at the reverse.
Indian traders apply MACD on Nifty, Bank Nifty, and stocks across timeframes to confirm trend changes and spot divergence between price and momentum. Like all moving-average tools it lags, so it is best used with price action and volume rather than in isolation.
Related terms
- DivergenceDivergence occurs when price and an indicator like RSI or MACD move in opposite directions, warning of a possible reversal.
- Golden CrossA golden cross is a bullish signal when a short-term moving average crosses above a long-term one, typically the 50-day above the 200-day.
- Moving AverageA moving average smooths price data over a set period to reveal the underlying trend.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.