Glossary / Trend & momentum

MACD (moving average convergence divergence)

Also called: moving average convergence divergence

MACD is an indicator built from the difference between two exponential moving averages of price. That difference is plotted as a line, a second average of the line is plotted alongside it as a signal line, and the gap between the two is drawn as a histogram.

How it is measured

How is MACD measured?

Subtract a longer-window exponential moving average from a shorter-window one to get the MACD line. Take an exponential average of that line to get the signal line. The histogram is the MACD line minus the signal line. All three are derived from closing prices, so all three are recalculated as each session closes.

Why it matters

Why does MACD matter to a swing trader?

MACD is a rate-of-change measurement dressed as a chart study: the two averages converge when a move is decelerating and diverge when it is accelerating. Swing traders read it for that acceleration rather than for direction, which price itself already shows. Because every component is an average of past closes, the indicator inherits the lag of its longest window.

In Tapeline

Does Tapeline use MACD?

Not an input to any Tapeline factor. The Momentum factor reads a momentum-quality input and a short-horizon return instead.

Tapeline publishes the six factor names and the ordering of their weights. The numeric weights, the scoring equation and the band edges are not published.

Related

See this in the product

What the Momentum factor measures · Full methodology

Related terms

Moving average
A moving average is the average closing price of a security over a fixed number of recent sessions, recalculated each session so the window rolls forward.
Rate of change
Rate of change is the percentage difference between the current price and the price a fixed number of sessions ago.
Momentum
Momentum describes the speed and persistence of a security's recent price movement.
RSI
RSI is an oscillator that compares the average size of a security's up sessions to the average size of its down sessions over a recent window, expressed on a 0-100 scale.

Back to the full glossary.

General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.