MACD Line Explained: Formula and Meaning

The MACD line is calculated as: MACD Line = 12-period EMA − 26-period EMA. Both EMAs (covered in the previous unit) are generally calculated using closing prices. This produces a single value that fluctuates above and below zero, depending on the relationship between the two EMAs.

When the MACD line is positive, this means the 12-period EMA is above the 26-period EMA, generally interpreted as reflecting stronger shorter-term momentum relative to the longer-term average. When the MACD line is negative, the opposite is true — the 12-period EMA is below the 26-period EMA.

The indicator's name reflects the behaviour of the two underlying EMAs: convergence occurs when the two EMAs move toward each other (the MACD line moves toward zero), and divergence, in this specific sense, occurs when the two EMAs move apart (the MACD line moves further from zero in either direction). This is distinct from the divergence concept covered later in this unit, which compares MACD to price rather than describing the EMAs' relationship to each other.