What is the MACD indicator and how does it work?

When the MACD line crosses above the signal line, short-term momentum has turned up; a cross below means it has turned down. Where it happens matters.

A bullish cross above zero is in line with an existing uptrend: it often marks the end of a pullback. A bullish cross far below zero in a downtrend is often only a pause before the next leg down. A cross of the zero line itself means the 12 EMA has crossed the 26 EMA, a slower signal that the trend may be changing.

The histogram shows the momentum of momentum. Bars that grow mean the move is speeding up. Bars that shrink while price still rises mean the push is fading, and the MACD line is getting closer to a cross.

Divergence works as it does with RSI. Price makes a higher high while the MACD peaks lower: bearish divergence. Price makes a lower low while MACD bottoms higher: bullish divergence. Treat both as warnings and wait for price structure to confirm.

On a quiet chart MACD and its histogram hover near zero and cross back and forth. That is a sign of a range, and crossovers there carry little weight.

MACD lags, because it is built from moving averages of past prices. Divergence is the exception that gives an early hint: momentum can fade before price turns. Treat it as a warning, not as an entry on its own.

On 4h, EURUSD is in an uptrend: higher highs and higher lows, and MACD has stayed above zero. Price pulls back into support at 1.0815–1.0820. The histogram shrinks towards zero, then a bar turns higher, and the MACD line crosses back above the signal line while still above zero.

That is a confirmation, not the trade. The entry is a buy above the next 1h candle high at 1.0838; the stop goes below the zone, at 1.0805, which is 33 pips. At 0.5% risk on a $10,000 account, the most you lose is $50, so the volume is about 0.15 lots. Before you send, the ticket shows the money at the stop and what your daily loss limit would have left.

Open Indicators, choose Oscillators and add MACD. It appears in its own pane below the chart with the standard 12, 26, 9 settings.

Pair it with tools that measure something else, such as one moving average for direction and your support and resistance zones for location. MACD and RSI both measure momentum; using both rarely adds new information. You can add up to 8 indicators per chart, but a clean chart is easier to read under pressure.