MACD

MACD (Moving Average Convergence Divergence) is built from two exponential moving averages (typically 12 and 26 periods) and a signal line (a 9-period EMA of the MACD line). The MACD line is the difference between the two EMAs. When the MACD crosses above the signal line, it's a bullish signal. When it crosses below, bearish. The histogram below shows the gap between the two lines — a visual measure of momentum acceleration. MACD is most useful for spotting momentum shifts and divergences. A bullish divergence (price makes a lower low but MACD makes a higher low) often precedes a reversal. A bearish divergence (price makes a higher high but MACD makes a lower high) is a warning that the trend is weakening. The indicator works best on 1-hour and higher timeframes. On lower timeframes, the noise overwhelms the signal and you get whipsawed.