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MACD Indicator: A Guide to Moving Average Convergence Divergence

The Moving Average Convergence Divergence (MACD) is a momentum indicator that illustrates the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A nine-day EMA of the MACD, called the 'signal line', is then plotted on top of the MACD, functioning as a trigger for buy and sell signals. Traders watch for crossovers between the MACD and its signal line for potential trend changes.

Quick Answer This page explains the Moving Average Convergence Divergence (MACD) indicator, a tool used in technical analysis to gauge the momentum of a stock's price. The MACD is calculated from the difference between two exponential moving averages (EMAs). Traders use crossovers and divergences between the MACD line and its signal line to identify potential buy and sell signals.
Examples3Screens60Average score89.33Updated2026-04-10Prices as ofOct 26, 2026 session

Figures come from Financial Modeling Prep (FMP). If FMP has no figure for a ticker, a price or fundamental may come from a Yahoo Finance fallback, or a price from an Alpaca fallback. SEC EDGAR is used only for filing links and company identity details (legal name, address), never for figures.

MoonshotScore V2 rates eligible US-listed companies from 0 to 100 against their sector peers on five pillars: Business Quality (weight 26), Financial Safety (weight 20), Valuation (weight 18), Growth Durability (weight 16) and Momentum (weight 12). It reads no news-sentiment or analyst data, and it is not a probability of future returns.

20,000+ US companies analyzed

Understanding the MACD Indicator

The MACD indicator is a versatile tool used to identify potential buying and selling opportunities. It helps traders assess the strength and direction of a trend, spot potential reversals, and confirm signals from other indicators. This guide provides an overview of the MACD indicator, its components, interpretation, and application in trading strategies.

Worked Example: These Figures Today

The companies used as examples above, with the current figures behind them. Illustrations of the metric — not a ranking, not a shortlist, and not a recommendation.

Example companies for this topic, listed in the order the guide introduces them — prices, day change and market cap as of the Oct 26, 2026 trading session (FMP quote); P/E and MoonshotScore from our latest stored data. Source: Financial Modeling Prep, Yahoo Finance.
Ticker Company Price Change Market Cap MoonshotScore
AAPL Apple Inc. $343.91 -1.10% $5.0T 89
MSFT Microsoft Corporation $532.60 +1.54% $4.0T 85
GOOGL Alphabet Inc. $316.80 -1.06% $3.9T 94

Interpreting MACD Signals

Key MACD signals include: * **Crossovers:** Bullish signals occur when the MACD line crosses above the signal line, while bearish signals occur when the MACD line crosses below the signal line. * **Divergence:** Bullish divergence happens when the price makes lower lows, but the MACD makes higher lows, suggesting upward potential. Bearish divergence occurs when the price makes higher highs, but the MACD makes lower highs, signaling potential downside. * **Histogram:** The histogram indicates the momentum of the trend. When the MACD line is above the signal line and the histogram is increasing, it suggests strengthening upward momentum. Conversely, when the MACD is below the signal line and the histogram is decreasing, it indicates strengthening downward momentum.
Related terms: moving average, exponential moving average, oscillator, convergence, divergence, signal line, histogram, technical analysis.
“MoonshotScore rates a US-listed stock 0 to 100 using five sector-relative pillars. Higher means stronger numbers across business quality, safety, valuation, growth and momentum. Eligible common stocks and ADRs only; funds, ETFs, warrants, units, SPACs, preferreds, and notes carry none. It is built for education and deeper due diligence, not financial advice.”
— Stock Expert AI published methodology (how MoonshotScore works)

Questions worth resolving before acting on the screen

What is the best MACD setting?

The 'best' setting depends on your trading style and the asset being traded. The standard 12, 26, and 9-day settings are widely used, but some traders prefer to adjust these values to better suit their specific strategies or the characteristics of the securities they trade.

Can the MACD be used on all timeframes?

Yes, the MACD can be applied to any timeframe, from intraday charts to weekly and monthly charts. However, the reliability of the signals can vary depending on the timeframe. Longer timeframes generally produce more reliable signals.

What are the limitations of the MACD?

The MACD is a lagging indicator, meaning it reacts to past price movements and may not always accurately predict future movements. It can also generate false signals, especially in choppy or sideways markets. Combining the MACD with other technical analysis tools and risk management techniques can improve its effectiveness.

How does the MACD relate to price action?

The MACD reflects the convergence and divergence of moving averages, which are derived from price data. Understanding the relationship between price action and MACD signals can provide valuable insights into potential trend changes and trading opportunities. Confirming MACD signals with price patterns and other indicators can enhance decision-making.

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Stock Expert AI provides data and analysis tools for educational purposes. This is not financial advice. Past performance does not guarantee future results. Always consult a qualified financial advisor before making investment decisions. Figures come from Financial Modeling Prep (FMP). If FMP has no figure for a ticker, a price or fundamental may come from a Yahoo Finance fallback, or a price from an Alpaca fallback. SEC EDGAR is used only for filing links and company identity details (legal name, address), never for figures.