Momentum · Oscillator · 1979 · Swing
Moving Average Convergence Divergence measures the gap between two exponential moving averages. It shows both the direction of the trend and whether momentum behind it is building or fading. Gerald Appel created it in the late 1970s, and Thomas Aspray added the histogram in 1986.
The MACD line is the 12-period EMA minus the 26-period EMA. The signal line is a 9-period EMA of the MACD line. The histogram shows the gap between the two. When MACD crosses above its signal line, momentum is turning up. When it crosses above zero, the faster average has moved above the slower one, which confirms the trend. A shrinking histogram warns that momentum is fading, often before price turns.
In a downtrend the MACD line (solid) sits below zero and below its signal line (dashed). The histogram bars measure the gap between the two.
Price is still drifting lower, but the histogram bars start shrinking. Downside momentum is fading before price itself has turned.
The MACD line crosses above its signal line, the most commonly traded MACD signal. Price even makes one more lower low, but MACD doesn't follow it down: a 'bullish divergence'. Below zero, this is still an early, higher-risk entry.
The MACD line crosses above zero: the 12-period average is now above the 26-period one. Later than the signal-line cross, but a firmer confirmation of the new trend.
Illustrative example only — not real market data.
The chart above shows the full sequence: falling momentum, a shrinking histogram, a signal-line cross, then a cross above zero. Note the divergence along the way. Price makes a lower low, but MACD doesn't. That's one of the most widely watched MACD patterns. Like any moving-average tool, it confirms rather than predicts.