MACD Indicator: Definition, Calculation, & Trading Signals

MACD stands for Moving Average Convergence Divergence. It's a technical analysis indicator used to identify trends in stock prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the 'signal line,' is then plotted on top of the MACD, which can be used to generate buy and sell signals. When the MACD crosses above the signal line, it's considered a bullish signal, while a crossing below is a bearish signal. The MACD can be useful in identifying trend reversals and the strength of a trend.