The MACD line is the 12-period EMA minus the 26-period EMA. The signal line is a 9-period EMA of the MACD line, and the histogram is the gap between the two. A MACD above zero means the short-term average is above the long-term one, an upward bias. Crossovers of the MACD and signal lines are read as shifts in momentum.
Example
On the daily BTC chart, the 12-day EMA is $61,200 and the 26-day EMA $60,500, so MACD is +700. The signal line sits at +850, so the histogram is −150: MACD is still positive, but momentum is fading. A few days later MACD crosses below the signal line, which many traders read as a bearish crossover.
Why it matters
MACD combines trend and momentum in one panel, which helps you filter for trades in the direction of the larger move. Shrinking histogram bars can show a trend losing strength before price turns.
Common mistake
Trading every crossover on a low timeframe. MACD lags because it is built from moving averages, and in ranging markets it produces many false crossovers. Use it as a filter or a confirmation rather than as a stand-alone entry signal.
Put it into practice
FAQ
- What do the MACD settings 12, 26 and 9 mean?
- They are the periods of the fast EMA, the slow EMA and the signal line. You can change them, but the defaults are by far the most widely used.
- What is a MACD divergence?
- When price makes a new high or low that the MACD line or histogram does not match, a sign that momentum is weakening.
- Is MACD better than RSI?
- They measure different things: MACD tracks trend momentum from moving averages, while RSI measures the balance of gains and losses. Many traders pick one so their signals do not simply repeat each other.