MACD

Spot Momentum

Markets don’t just go up or down, they accelerate, stall, reverse. That’s why the best traders rely on momentum (to avoid getting wrecked trying to make it). One of the key ways to track momentum is by getting a grip on indicators that show strength.

One of the go-to tools? MACD… Short for Moving Average Convergence Divergence.

It might sound like a mouthful, but MACD is one of the cleanest ways to measure trend shifts. Traders use it to sense when momentum might flip, or build pressure ahead of a move.

Let’s break it down.

What Is MACD?

At its core, MACD is a momentum oscillator. It compares two moving averages — one fast, one slow — to give a visual representation of distance and strength.

MACD gives you:

• MACD line – the difference between two EMAs

• Signal line – a smoothed average of the MACD line

• Histogram – a visual of how far apart those lines are

These three parts help highlight changes in momentum and may help traders spot trend shifts before they show up in the candles.

How the MACD Works

Let’s go part by part:

MACD Line

This is the core of the indicator. It’s calculated by subtracting the 26-period EMA from the 12-period EMA:

MACD line = 12 EMA – 26 EMA

If the MACD line is rising, momentum is increasing. If it’s falling, the trend may be losing steam.

Signal Line

This smooths out the MACD line (typically a 9-period EMA of it). Traders often look at crossovers between the MACD and Signal line for momentum shifts.

• When MACD crosses above the Signal line: possible shift upward.

• When MACD crosses below: possible shift downward.

Histogram

The histogram shows the distance between the MACD and Signal line.

• Bigger bars = stronger momentum

• Shrinking bars = momentum might be fading

It’s a quick visual cue for how strong a trend may be… Or how close it is to flipping.

Reading MACD

MACD doesn’t predict price, but it gives a view into how momentum is behaving. Here’s what traders often observe:

1. Signal Line Crossovers

When the MACD line crosses the Signal line, it’s usually seen as a momentum change.

• A crossover with widening separation may reflect building strength

• Crossovers near the zero line are often seen as less aggressive than those far from it

Still, not every crossover leads to a follow-through. Market context matters.

2. Centerline Crossovers

The centerline (aka the zero line) is where the MACD and Signal line intersect the midpoint between bullish and bearish zones.

• MACD crossing above the zero line shows the fast EMA is leading

• MACD crossing below signals the slower EMA has taken over

These shifts can reflect broader momentum, but they also tend to lag… Especially in fast-moving or choppy markets.

Customizing MACD

The default MACD setup (12, 26, 9) works for many, but traders often tweak it depending on their asset and time frame:

• Faster settings (e.g., 5, 35, 5) — more responsive, more signals, more noise

• Slower settings — smoother signals, but may lag more

In crypto, where volatility runs high, finding your sweet spot is key.

MACD Tips for Traders

• Go easy in chop. MACD’s built for trends, not sideways noise

• Pair it with RSI or volume. MACD shows momentum, but not overbought/oversold

• Zoom out. Use higher timeframes to confirm trend strength before making short-term plays

Final Thoughts

MACD is a TA classic for a reason: it’s simple, visual, and gives you insight into trend strength.

Just don’t treat it like a cheat code. It’s a tool, not a crystal ball. Use it to add context, not to chase every crossover.