Section 3 · Chart Reading
MACD
The indicator that tells you when momentum is building — or fading.
MACD tells you when momentum is building — or fading.
MACD line (12 EMA − 26 EMA), Signal line (9 EMA of MACD), Histogram (MACD − Signal). Crossover = buy/sell signal. Shrinking histogram = momentum weakening.
3 things to know
Developed by Gerald Appel in the late 1970s — still one of the most-used indicators.
The crossover (MACD crossing Signal line) is the primary buy/sell signal.
MACD divergence (price at new high, MACD not) warns momentum is secretly weakening.
Key vocabulary — tap each card
Practice
How to read MACD
Check MACD line direction
Above zero = bullish bias. Below zero = bearish bias. This sets your directional lean.
Look for the crossover
MACD crossing above the Signal line = bullish signal. MACD crossing below = bearish signal.
Read the histogram bars
Growing histogram = accelerating momentum. Shrinking histogram = fading — momentum is running out.
Check for divergence
Price at new high but MACD at lower high = hidden weakness. This often precedes a reversal.
Did you know?
Gerald Appel used MACD to trade his own money for decades after inventing it — one of the few indicator creators who was also a successful practitioner. Most indicators are created by academics. MACD was created by a trader.
🧠 Knowledge Check
1 / 3Answer all questions correctly to unlock the next lesson
The MACD line is calculated as...