MACD (Moving Average Convergence Divergence)

A trend indicator that uses the gap between a fast and a slow exponential moving average to show whether the two averages are pulling apart or closing in.

Weapon tier: Elite
Slots used: Sub-charts 1/2
Created by: Gerald Appel · 1970s

Concept

MACD draws, as a line, how far apart an average that follows recent prices quickly and one that follows them slowly are. When the fast average is above the slow one the value is above 0, and when it is below, the value is below 0.

It is drawn not in the price area but in its own “Sub-charts” panel. The MACD line, the Signal line (an average of that line) and the Histogram bars (the difference between the two) appear together.

The first chart on this page has a yellow arrow (↑ or ↓) on every candle where the two lines cross. These are the arrows that the shop’s “Markers” item adds to the match screen.

MACD
Signal
Histogram
Markers

Charts by TradingView Lightweight Charts™

The yellow arrows are the “Markers”. The candle marked with a yellow vertical line is where the MACD line rose above the zero line. Drag the chart sideways with a finger or the mouse to move it, and pinch with two fingers to zoom in. With a keyboard, click the chart, then use ←/→ to move and +/− to zoom.

How it is calculated

An exponential moving average gives more weight to recent candles. The simple moving average in lesson 3 gives every candle the same weight.

MACD = 12-candle exponential moving average of the close − 26-candle exponential moving average

Signal = 9-candle exponential moving average of the MACD line

Histogram = MACD − Signal. Above 0 means the MACD line is above the Signal line.

The value is a “difference in price”, so it is in price units such as won or dollars. Expensive stocks give large values and cheap ones small values.

Parameters

What it sets	Name in the game	Default	Range
Candles for the fast average	fastPeriod	12	2 – 100
Candles for the slow average	slowPeriod	26	2 – 200
Candles for the Signal line (an average of the average)	signalPeriod	9	2 – 100

Trading ideas

Crosses: when the MACD line crosses up through the Signal line, it is commonly read as a buy signal, and when it crosses down, as a sell signal. Some traders pay closer attention to an upward cross that happens below the zero line.

Zero line: when the MACD line is above the zero line, the fast average is above the slow one, so it is commonly read as a rising trend; below it, as a falling trend.

Divergence: when the price makes a lower low than before but the MACD line makes a higher low, it is commonly read as a sign that the selling pressure is fading (bullish divergence). The next chart shows that scene. The price often keeps falling for quite a while after a divergence, so it is not a sure signal.

MACD
Signal
Histogram

Charts by TradingView Lightweight Charts™

The ↑ marks are the two lows being compared. The second low is a candle with a long lower wick.

Common traps

Because it is an average of averages, it is late. By the time a cross appears, the price has often already moved quite a bit. As at the end of the first chart, the Histogram only drops below 0 long after the price has turned.
In a sideways move the two lines tangle near the zero line and cross often, and most of those crosses are false signals.
The size of the value depends on the stock’s price, so do not compare MACD values between different stocks.

In the game

MACD is an “Elite” weapon and uses 1 of the “Sub-charts” panels (limit 2). Volume in the starting setup already uses 1, so adding MACD brings it to 2 (0 left).
The Histogram is drawn as bars in a single color. The zero line is drawn only when the panel has values below 0.
The yellow arrows are visible only to players who own the shop’s “Markers” item. The shop describes it like this: “Marks buy and sell signals with arrows inside indicator panels. An ↑ (buy) or ↓ (sell) appears on the candle where lines cross or price leaves an overbought/oversold zone; indicators with no direction get a ○ instead. Buy once and it applies to every indicator you equip.” It is also included in the Advanced and Elite “Tier bundles”.
An ↑ points to the buy side and a ↓ to the sell side, but like every other signal in this dictionary, they are not sure signals.

Related indicators and lessons

Ichimoku Cloud — A trend indicator that uses five lines and a cloud to show at a glance where the price sits within its past price range.
Pivot Line — An indicator that uses the previous candle’s high, low and close to set five reference lines (Pivot, R1, R2, S1, S2) for the current candle in advance.
DMI — A trend indicator that shows, as two lines side by side, the force pushing highs higher (+DI) and the force pushing lows lower (−DI).
Parabolic SAR — An indicator that uses a single trailing “stop line” to show whether the price is in a rising or a falling stretch, and when it flipped.
Aroon — An indicator that judges whether a new trend has started by how long ago the recent high and low were made.
Supertrend — A trend indicator that keeps a single line above or below the price and uses its color and position to show whether the price is in an uptrend or a downtrend.
Exponential Moving Average — A line that averages recent closes with more weight on the newest ones, so it follows price changes faster than the simple moving average.
MA Golden Cross — An event marker that puts a vertical line on the candle where the short moving average crosses up through the long one.
MA Dead Cross — An event marker that puts a vertical line on the candle where the short moving average crosses down through the long one.
ADX — An indicator that shows, as a number from 0 to 100, how strongly the price is moving in one direction, whether up or down.
3. Moving averages