Stock market glossary

MACD

The MACD (Moving Average Convergence Divergence) measures the difference between two exponential moving averages to identify the strength and turning points of a trend.

It's made up of three elements: the MACD line, the signal line and the histogram. It's used with the standard parameters of 12, 26 and 9 periods, so at least 34 periods of data are needed.

How it's calculated

MACD line = 12-period EMA − 26-period EMA. Signal line = 9-period EMA of the MACD line. Histogram = MACD line − signal line.

Worked example

If the 12-day EMA is €25.40 and the 26-day one €24.90, the MACD line is 0.50. If the signal line is 0.35, the histogram is 0.50 − 0.35 = +0.15: the fast average is moving upwards away from the slow one.

How to read it

MACD line above the signal line (positive histogram): bullish momentum; below: bearish. The crossover between the two lines is one of the most followed signals, as is the MACD crossing above or below zero.

💡 On Fanta-Trade you'll find this indicator calculated for every stock, over one week, one month, three months and one year, in the "Technical indicators" section of the stock page.

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