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Reversion Docs

MACD Overview

MACD (Moving Average Convergence Divergence) measures the relationship between two EMAs — the MACD line is the difference between the fast EMA and slow EMA. The signal line is an EMA of the MACD line. Crossovers between the MACD and signal line indicate momentum shifts.

MACD is one of the most popular momentum indicators because it captures both trend direction (MACD above/below zero) and momentum timing (signal line crossovers) in a single indicator.

How MACD Works

Section titled “How MACD Works”

Core Concept

Section titled “Core Concept”
  1. Calculate Fast EMA: 12-period EMA of closing price
  2. Calculate Slow EMA: 26-period EMA of closing price
  3. MACD Line: Fast EMA - Slow EMA
  4. Signal Line: 9-period EMA of the MACD line
  5. Histogram: MACD Line - Signal Line (visual momentum)

Key Characteristics:

  • Dual Signal System = Provides both zero-line crosses and signal line crossovers
  • EMA-Based = Uses EMA for responsiveness
  • Unbounded = No fixed range — values scale with price
  • Most Popular Momentum Indicator = Widely used across all markets

Visual Interpretation

Section titled “Visual Interpretation”

MACD Behavior:

  • MACD above zero indicates bullish trend (fast EMA > slow EMA)
  • Signal line crossover above = bullish momentum, below = bearish
  • Histogram shows the gap between MACD and signal line
  • Divergence between MACD and price can signal potential reversals

Trading Signals Available on Reversion

Section titled “Trading Signals Available on Reversion”

These are the signal names you select when configuring MACD in the algorithm builder or via the MCP agent:

SignalTriggers WhenTypical Use
macdLine_above_signalLineMACD line crosses above signal lineBullish momentum crossover — long entry
macdLine_below_signalLineMACD line crosses below signal lineBearish momentum crossunder — short entry or long exit

Display: Separate pane

Category: Momentum

Threshold range: Unbounded (centered on zero)

Key Characteristics

Section titled “Key Characteristics”

What MACD Does Well:

  • Dual Functionality: Trend direction (zero line) + momentum timing (signal crossover)
  • Responsive: EMA-based for quick reaction
  • Signal Line Crossovers: Well-defined entry/exit signals
  • Widely Understood: Universal momentum reference