What it means
Above zero means upward momentum. Crossovers show momentum turning; a shrinking histogram warns earlier.
In practice
MACD shows trend and momentum in one panel. The line above zero means the faster average is above the slower one, an uptrend by that measure. The histogram shows whether momentum is growing or shrinking.
Traders use signal line crossovers in the direction of the larger trend as timing signals, and watch for the histogram to shrink as an early sign that a move is losing pace.
What to watch for
MACD is built from moving averages, so it lags, and in a sideways market it crosses back and forth around zero without meaning. It has no fixed upper or lower limit, so readings cannot be compared between different instruments.
Related terms
3 terms- Moving averageMAThe average closing price of the last N candles, recalculated each candle to smooth out noise.
- RSIWilder's momentum oscillator from 0 to 100 comparing recent gains with recent losses.
- DivergencePrice and an oscillator disagreeing: a higher high in price with a lower high in RSI, for example.