MACD stands for Moving Average Convergence Divergence and was created by Gerald Appel in the late 1970s. The indicator is built from three components: the MACD line (the 12-period EMA minus the 26-period EMA), the signal line (a 9-period EMA of the MACD line), and the histogram (the difference between the two). When the MACD line crosses above the signal line, it suggests that short-term momentum is strengthening relative to the longer-term trend. The histogram is particularly useful because it often signals momentum shifts before the actual crossover occurs — when histogram bars shrink toward zero, acceleration is fading. Centerline crossovers, where MACD moves above or below zero, represent broader trend shifts and are considered more reliable than signal-line crossovers alone.
