What is MACD?
MACD (moving average convergence divergence) is the difference between a fast and a slow average of the price. Above zero, the price has been heading up; below zero, it has been heading down. An extra line — the signal line — shows whether that speed is picking up or fading.
When MACD crosses above the signal line, upward speed is picking up.
How it is calculated
MACD = the average of the last 12 days' prices minus the average of the last 26 days' prices. Both are exponential averages, which weight the latest days most. The signal line is a 9-day average of MACD itself, and the bars are the difference between MACD and the signal line.
The numbers 12, 26 and 9 are the standard and are used almost everywhere — Kiggo included. The method was developed by Gerald Appel in the late 1970s.
How to read it
- Above zero: the short average is above the long one. The price has been heading up.
- Below zero: the short average is below the long one. The price has been heading down.
- Crossing above the signal line: upward speed is picking up. Many call it a buy signal — but it describes speed; it does not predict anything.
- Growing bars: speed in that direction is increasing. Shrinking bars: it is fading.
What MACD cannot do
MACD is built from averages, so it always lags the price a little. In a stock moving sideways it gives lots of crosses that lead nowhere. And the value is in the stock's own currency, so a MACD of 1.5 in one stock cannot be compared with 1.5 in another.
The typical beginner's mistake
Buying every time MACD crosses above the signal line. In a sideways stock that can happen many times in a few months, and every trade costs a commission. The cross says something about recent speed — not about the company.
How you see it in Kiggo
Open a stock and tap “Go deeper into technical analysis”. MACD sits in the “Technical indicators” table with a positive or negative signal, and below the chart it is described in words, e.g. “MACD above the signal line since 9 Oct”. Tap MACD in the table to see how it is calculated.
Related terms
Frequently asked questions
Is MACD a buy signal?
Many use the cross as a signal, but it only describes the recent speed of the price. It says nothing about what the stock is worth, and when the price moves sideways it gives lots of false crosses.
Why 12, 26 and 9?
They are the number of periods in the three averages: 12 and 26 for the two price averages and 9 for the signal line. It is the standard setting almost everyone uses.
What is the difference between MACD and RSI?
RSI measures, on a scale from 0 to 100, how fast the price has risen or fallen. MACD compares two averages and has no fixed scale. RSI says most about “too hot or too cold”, MACD most about direction and speed.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated .
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
