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MACD (Moving Average Convergence Divergence)
Trend-momentum indicator: difference between 12 and 26-period EMAs, plotted with a 9-period signal line.
What it is
MACD, created by Gerald Appel in the late 1970s, combines trend-following and momentum into one tool. It plots three components: the MACD line (12-EMA minus 26-EMA), a signal line (9-period EMA of the MACD line), and a histogram (the gap between them). Buy signal: MACD line crosses ABOVE the signal line. Sell: crosses BELOW. The histogram makes momentum shifts visible before the cross — shrinking bars often precede a turn. Most powerful when read with the broader trend in mind: MACD bullish crosses in a downtrend tend to fail.
Example
ETH consolidates around $2,100 for two days. MACD histogram bars shrink, then flip from red to green. Two hours later the MACD line crosses up through the signal line. Price breaks $2,140 and runs to $2,180 — a clean MACD bullish-cross trade.
How Indikora uses MACD
Indikora's Quant agent uses MACD on three timeframes simultaneously (15m, 1h, 4h). Only cross-timeframe agreement is reported as a strong MACD signal.
Related terms
- RSI (Relative Strength Index) — Momentum oscillator on a 0–100 scale that flags overbought (>70) or oversold (<30) conditions.
- EMA (Exponential Moving Average) — Moving average that weights recent prices more heavily — reacts faster than a simple moving average.
- Divergence (RSI / MACD) — When price makes a new extreme but the indicator doesn't — a leading signal of trend exhaustion or reversal.
- Trend (Uptrend, Downtrend, Sideways) — The dominant direction of price over a given timeframe: up, down, or sideways (consolidation).
Strategy guides that cover this
- How to Trade with RSI — A Complete Strategy Guide
Three reliable RSI setups, when each works, and the mistakes that turn RSI from edge into noise - MACD Divergence Strategy — The Complete Playbook
How to spot, validate, and trade MACD divergence with high-conviction confluence checks