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.
