Crypto glossary
MACD
MACD (moving average convergence divergence) is a momentum indicator that tracks the gap between two exponential moving averages and its signal line.
The MACD line is the difference between a fast and a slow exponential moving average of price, by default the 12-period and 26-period EMAs. A 9-period EMA of that line forms the signal line, and the histogram plots the distance between the two. When the fast average pulls away from the slow one, momentum is building; when they converge, it is fading.
Traders watch three things: the MACD line crossing above or below its signal line, the MACD crossing zero, which means the two averages have crossed, and divergences where price makes a new high or low that the MACD fails to confirm. On bitcoin, weekly MACD crosses are often cited in market commentary as signs of a change in trend.
Because it is built from moving averages, MACD lags price and produces many false crosses in sideways markets. Its values are absolute, not bounded like the RSI, so readings cannot be compared across assets with very different prices.
Example
On the daily ETH chart the MACD line crosses above its signal line after weeks of decline, and the histogram turns positive. A swing trader takes it as a cue to look for long entries, with a stop below the recent low.