IntermediateStock Alerts + Tools0:45Indicators

MACD Is Two Averages Wearing a Costume

Strip the histogram away and MACD is the distance between two moving averages — which explains everything it does well and everything it does badly.

0:45 · 6 scenes

This lesson is part of a Stock Alerts + Tools plan.

What the lesson covers

0:00MACD looks like its own indicator. It is two moving averages, subtracted.
0:05The three parts. The line is one average minus another. The signal smooths the line. The bars are the gap.
0:14What a crossing is. A signal crossing says the gap between two averages just changed direction. That is all.
0:24Why it whipsaws sideways. With no trend the two averages sit on top of each other and the line crosses constantly.
0:32The part worth watching. Shrinking bars mean the averages are converging — the move is losing its push.
0:40Read the histogram as a speedometer, not as a buy button.

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