What is MACD?

MACD was developed by Gerald Appel in the late 1970s. It reveals changes in strength, direction, momentum, and duration of a trend. MACD is one of the most popular technical indicators used by traders.

TypeMomentum + Trend
Default Settings12, 26, 9
Best ForTrending Markets
TimeframesAll (4H+ preferred)

MACD Components

Understanding the three components of MACD is essential for proper interpretation.

MACD Line

The difference between 12-period EMA and 26-period EMA.

MACD = EMA(12) - EMA(26)
  • Reacts faster to price changes
  • Above zero = Bullish trend
  • Below zero = Bearish trend

Signal Line

9-period EMA of the MACD line. Acts as a trigger for signals.

Signal = EMA(MACD, 9)
  • Smoother, slower moving
  • Crossovers generate signals
  • Used to confirm direction

Histogram

Visual representation of distance between MACD and Signal line.

Histogram = MACD - Signal
  • Shows momentum strength
  • Growing bars = increasing momentum
  • Shrinking bars = weakening momentum

Visual Breakdown

MACD Line (Fast)
Signal Line (Slow)
Histogram (Difference)

MACD Trading Signals

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Bullish Signal Line Crossover

Buy Signal

MACD line crosses ABOVE the signal line from below.

✓ Stronger when below zero line (oversold territory)✓ Confirm with histogram turning green
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Bearish Signal Line Crossover

Sell Signal

MACD line crosses BELOW the signal line from above.

✓ Stronger when above zero line (overbought territory)✓ Confirm with histogram turning red
🎯

Bullish Zero Line Crossover

Trend Confirmation

MACD line crosses ABOVE zero. Confirms shift from bearish to bullish trend.

✓ Strong trend confirmation✓ Short-term EMA > Long-term EMA✓ Good for trend following entries
🎯

Bearish Zero Line Crossover

Trend Confirmation

MACD line crosses BELOW zero. Confirms shift from bullish to bearish trend.

✓ Strong trend confirmation✓ Short-term EMA < Long-term EMA✓ Good for short entries
⚡

MACD Divergence

Reversal Warning

Price and MACD moving in opposite directions signals potential reversal.

Bullish Divergence

Price makes lower lows, MACD makes higher lows

→ Potential reversal UP
Bearish Divergence

Price makes higher highs, MACD makes lower highs

→ Potential reversal DOWN

MACD Trading Strategies

1

Crossover Strategy

The most basic MACD strategy - trade the signal line crossovers.

Entry (Long)MACD crosses above signal line
ExitMACD crosses below signal line
Stop LossBelow recent swing low
⚠️ Can generate false signals in ranging markets
2

Zero Line Filter

Only take crossovers that align with the zero line position.

Long OnlyWhen MACD is above zero
Short OnlyWhen MACD is below zero
✓ Filters out counter-trend trades
3

Histogram Reversal

Use histogram peak/trough reversals for early entry signals.

EntryHistogram peaks and starts declining (or troughs and starts rising)
ConfirmationWait for 2-3 bars of declining/rising histogram
✓ Earlier entries than crossover strategy
4

MACD + RSI Combo

Combine MACD with RSI for confirmation.

BuyMACD bullish cross + RSI < 30 (oversold)
SellMACD bearish cross + RSI > 70 (overbought)
✓ Higher probability setups

📊 MACD Cheat Sheet

SignalConditionActionStrength
Bullish CrossoverMACD > SignalBuy / LongMedium
Bearish CrossoverMACD < SignalSell / ShortMedium
Bullish Zero CrossMACD crosses above 0Trend Up ConfirmedHigh
Bearish Zero CrossMACD crosses below 0Trend Down ConfirmedHigh
Bullish DivergencePrice ↓ + MACD ↑Reversal WarningVery High
Bearish DivergencePrice ↑ + MACD ↓Reversal WarningVery High
Histogram GrowingBars increasingMomentum increasingConfirmation
Histogram ShrinkingBars decreasingMomentum fadingWarning

⚙️ MACD Settings

Default (12, 26, 9)

Standard settings. Works well for most timeframes and markets.

Use for: General trading, swing trades

Fast (5, 13, 6)

More sensitive, quicker signals. Better for short-term trading.

Use for: Day trading, scalping

Slow (19, 39, 9)

Less sensitive, fewer signals. Better for longer-term trends.

Use for: Position trading, investment

Start Using MACD Today

Apply MACD analysis with our real-time crypto screener and identify trading opportunities.

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Frequently Asked Questions

What are the best MACD settings for crypto?

The default MACD settings (12, 26, 9) work well for most crypto trading on daily charts. For shorter timeframes, some traders use faster settings like (5, 13, 1) or (8, 17, 9). On weekly charts, the default settings provide stronger signals with fewer false positives.

Is MACD a leading or lagging indicator?

MACD is a lagging indicator because it uses moving averages, which are based on past prices. However, MACD histogram divergence can act as a leading signal when it shows momentum weakening before price actually reverses. Combining MACD with leading indicators like RSI improves timing.

What does a MACD crossover mean?

A bullish MACD crossover occurs when the MACD line crosses above the signal line, suggesting upward momentum. A bearish crossover is when MACD crosses below the signal line. Crossovers above the zero line are stronger bullish signals; crossovers below zero are stronger bearish signals.

How do you read the MACD histogram?

The MACD histogram shows the difference between the MACD line and the signal line. Growing histogram bars (getting taller) indicate strengthening momentum. Shrinking bars suggest momentum is fading. A histogram crossing zero confirms a MACD crossover.

Practice Trading with MACD

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Mock Trade Challenge

Spot MACD crossovers and histogram shifts to make informed trades.

💡

MACD just crossed above the signal line and the histogram is turning positive after a period of consolidation...

What would you do here?

🧠

Test Your Knowledge

Answer these questions to earn XP and unlock achievements.

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Question 1

What generates a classic MACD buy signal?