MACD (Moving Average Convergence Divergence) explained

Momentum

The full guide, with worked examples and what our tests found: MACD Crossover Studies

What MACD measures

MACD (Moving Average Convergence Divergence) shows the relationship between two EMAs of price, typically 12 and 26 periods. The MACD line is their difference; the signal line is a 9-period EMA of the MACD line; the histogram shows the gap between them. It's primarily a trend-following momentum indicator.

How MACD readings are interpreted

When MACD crosses above the signal line, it's a bullish signal (histogram turns positive). When it crosses below, bearish (histogram turns negative). A MACD above zero means the 12 EMA is above the 26 EMA — the short-term trend is up. The histogram's size shows momentum strength — shrinking bars before a crossover warn of an impending direction change.

Conventional MACD levels

MACD crossing above signal line: bullish crossover
MACD crossing below signal line: bearish crossover
Zero line cross: MACD crossing above 0 = bullish trend, below 0 = bearish trend
Histogram peak/trough: fading momentum before price reversal
Divergence: price makes new high but MACD doesn't = bearish divergence (and vice versa)

Where MACD works, and where it does not

Works best in trending markets with clear directional momentum. In sideways/choppy markets MACD generates frequent false crossovers — filter with ADX or Choppiness Index. The classic 12/26/9 comes from daily charts. GU Analyser defaults to 6/13/4 on hourly because hourly bars are noisier — that is our default rather than a convention, and 12/26/9 on hourly is a perfectly reasonable choice too.

Indicators commonly read alongside MACD

RSI: Both showing momentum in the same direction = high-conviction signal
ADX: MACD crossovers are conventionally given more weight when ADX is above 20 (confirmed trend)
Volume: Increasing volume on MACD crossover confirms the signal

Known limitations of MACD

MACD lags price significantly — entries are often late, especially at fast reversals
In low-volatility ranges, MACD crossovers are noise; pair with Bollinger Band Width to filter
On shorter timeframes the signal is very noisy — consider 4H or daily minimum

MACD in practice

Use the zero-line cross for trend direction, the signal-line cross for entry timing
MACD histogram peak and trough often precede price reversal by 1-3 bars — useful for early warning
In strong trends, 'bullish continuation' = MACD dips below signal then quickly recovers above it
Which side of zero MACD sits on gives context to a crossover

Other momentum indicators

Stochastic Oscillator
Stochastic RSI
ConnorsRSI
CCI — Commodity Channel Index

On the test bench

What Happens After a MACD Crossover?
15,698 bullish MACD signal-line crossovers across 197 US large-cap stocks, 2018 to 2026, measured over the following 35 trading days against the same measurement taken from every trading day in those stocks.

A Stronger Benchmark for the MACD Crossover
Study 002 compared MACD crossovers with every trading day. A reader asked if that was fair, so we re-ran the test only against days with similar trend and volatility, with a calendar-block bootstrap interval on each crossover-minus-comparison difference.

Do Sharper MACD Crossovers Lead to Better Returns?
Not every MACD crossover crosses by the same amount. We measured the size of the one-day histogram move, scaled it by the share price, and tested whether sharper crossovers were followed by larger 35-day returns — with one threshold fixed in advance and applied once to data it had not seen.

MACD Crossover Studies
A series of event studies on the MACD signal-line crossover in US large-cap stocks: what follows a crossover, whether the benchmark it is measured against is fair, and whether the size of the crossover carries information of its own.

Testing ideas built on MACD

A reading of MACD can be written as an exact rule and checked against historical data — as a full strategy with entries, exits and costs, or as a single condition and what followed it:

How to backtest a trading strategy without code
Event analysis: what follows a market event

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.