The MACD Signal Line is the nine-period exponential moving average (EMA) of the MACD line. The MACD line itself is typically the difference between two EMAs (commonly the 12-period and 26-period EMAs) and the signal line smooths this result with a 9-period EMA. The MACD histogram shows the difference between the MACD line and the MACD Signal Line, giving a visual view of how far the MACD line is from its signal smoothing.
Traders watch the interaction between the MACD line and the MACD Signal Line on price charts. When the MACD line crosses above the MACD Signal Line, momentum in the MACD line is considered to be rising; when it crosses below, momentum is viewed as decreasing. The histogram can help visualize the strength of that momentum and its changes over time, with larger bars suggesting a wider gap between the MACD line and the signal line.
The MACD Signal Line is a lagging indicator because it is derived from moving averages. It is commonly used in conjunction with price action and other indicators rather than in isolation. Analysts may also look for divergences between MACD measures and price movement to gain context about potential shifts in trend or momentum.
On a daily chart, the MACD line crosses above the MACD Signal Line and the histogram turns positive, illustrating a momentum shift in the MACD measures.
MACD · MACD Histogram · Exponential Moving Average (EMA) · Moving Average · Momentum Indicator · Relative Strength Index (RSI)