StockYanWhat MACD measures
MACD stands for Moving Average Convergence Divergence. It compares two moving averages of the price: a fast one and a slow one. Most charts use 12 days for the fast one and 26 days for the slow one.
A moving average is the average closing price over a set number of days. When the fast average pulls further above the slow one, prices are rising faster than before. When it sinks toward or below the slow one, the rise is cooling.
The parts of a MACD chart
A MACD chart sits under the price chart and has a few pieces.
- MACD line: the fast average minus the slow average.
- Signal line: a 9-day average of the MACD line.
- Histogram: bars showing the gap between the two lines.
- Zero line: where the two averages are equal.
How to read a crossover
When the MACD line crosses above the signal line, short-term momentum is turning up. When it crosses below, momentum is turning down.
Where the cross happens matters. A cross above the zero line happens inside an uptrend. A cross below the zero line happens inside a downtrend.
What the histogram tells you
Tall bars mean the MACD line is far from the signal line, so momentum is strong. Shrinking bars mean the gap is closing, which often comes before a crossover.
Shrinking bars are a sign to watch. They do not always lead to a turn.
Limits of MACD
MACD is built from moving averages, so it reacts after the price has already moved. In a sideways market it can cross back and forth many times and give mixed readings.
It works best next to the price chart, support and resistance, and volume. Many traders also check RSI to see how stretched a move is.
MACD divergence
Like RSI, MACD can disagree with the price. If the price makes a higher high while the MACD line makes a lower high, the upward push is weakening. If the price makes a lower low while MACD makes a higher low, selling is easing.
Divergence is an early warning. It can last a long time before the price turns, and sometimes the price does not turn at all.
A simple way to start
When you open a MACD chart, ask four quick questions.
- Is the MACD line above or below zero?
- When was the last crossover?
- Is the histogram growing or shrinking?
- Does the price chart agree?
A NEPSE example
On 27 Oct 2026, Nabil Bank (NABIL) closed at Rs 542. Its daily MACD line was 4.30 and its signal line was 3.71, so the histogram was 0.59.
Both lines were above zero, and the MACD line was above the signal line. That reads as an uptrend with momentum still positive.
The histogram was shrinking, though, which means the push was fading. That is something to keep an eye on in the next sessions.