MACD is one of the technical analysis tools that traders in the Crypto market often use. Using it correctly and understanding the MACD line can help bring profits and minimize risks. So what does MACD meaning? How to apply MACD effectively? Let’s explore Crypto Trading in the article below.
MACD meaning? Information you need to know before trading Crypto
MACD is a popular technical tool that Crypto investors often use. Understanding how to apply the MACD line to analyze the market will help trading become more accurate and effective.
What is the concept of MACD?
MACD is one of the important technical indicators known to many Crypto investors. The acronym stands for “Moving Average Convergence Divergence”, MACD, or moving average convergence divergence. This indicator was created by Gerald Appel in 1979.
The MACD indicator provides signals about market movements. It helps investors determine the right time to buy or sell. To calculate the MACD, investors will base on the difference between two moving averages EMA (Exponential Moving Average) in 12 and 26 days.

How to calculate MACD value
To calculate MACD, you need to determine the values of each component. Here is the exact calculation for each component:
- MACD Line: Calculated by the formula: MACD = EMA(12) – EMA(26). The MACD line is represented on the chart by all the MACD difference values. It is usually shown in blue. If EMA(12) crosses EMA(26), MACD is positive and vice versa.
- Signal Line: Calculated by the formula: Signal = EMA(9) of MACD line. EMA(9) of MACD is used to calculate the Signal line. The Signal line is usually drawn automatically on trading platforms and is shown in orange.
- MACD Histogram: Determined by the difference between the MACD line and the Signal line. The calculation formula is: Histogram = MACD – Signal. When the MACD and Signal lines intersect, the value of the Histogram is 0. If the MACD is greater than the Signal, the Histogram will be positive and vice versa.
These values are often used to assess market movements, thereby helping traders make appropriate trading decisions.
What are the components of MACD meaning?
Let’s detail the components that make up the MACD indicator to understand it better. The MACD consists of four basic components:
- MACD Line: This is the main component that shows the price trend of the market. It is calculated by the difference between two exponential moving averages EMA 12 and 26. This is an important indicator to assess price volatility.
- Signal Line: This line is the 9-day EMA of the MACD line. When the MACD and Signal lines intersect, they often predict a reversal in the price trend. This creates a profitable trading opportunity.
- Histogram: This chart shows the divergence and convergence between MACD and Signal. By measuring the difference between these two lines, the Histogram shows the strength of the trend.
- Zero Line: This is a reference line that helps traders assess the strength of a market trend. Crossing the Zero Line can indicate increasing or decreasing price momentum.

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Instructions on how to recognize the MACD indicator on the chart
What is the MACD meaning? The easiest way to identify the MACD line is by its color. The MACD line will usually be represented by a blue line. The signal line is usually represented by a red line.
When the MACD is positive, it means that the shorter EMA is above the longer EMA. The larger the difference between the two lines, the more positive the MACD is. This is a signal for a strong market uptrend.
Conversely, when MACD is negative, the shorter EMA will be below the longer EMA. The larger the gap between the two EMAs, the more negative the MACD value. This indicates a clear downtrend is underway.
Depending on the movement and position of the EMA lines, the relationship between them can be either divergent or convergent. When the two lines move away from each other, it is divergence. When the two lines move closer together, it is convergence.

How to use MACD line in coin trading
There are several popular ways to use MACD: crossovers, overbought/oversold zones, and divergences.
- Crossovers: The most basic use of MACD is to sell when the MACD line (blue) crosses below the signal line (red). Conversely, a buy signal occurs when the MACD crosses above the signal line. Buy/sell signals are also often generated when the MACD crosses above zero.
- Overbought/Oversold Zones: MACD is also used as an overbought/oversold indicator. When the gap between the short-term moving average and the long-term moving average widens suddenly (i.e. MACD increases), it may indicate that the price is overbought and may soon correct. The overbought/oversold levels according to MACD may vary for each Crypto.
- Divergence: A signal that the current trend is about to end is when the MACD diverges from the stock price. A bearish divergence occurs when the MACD makes a new low while the price does not. A bullish divergence occurs when the MACD indicator makes a new high while the price does not. Both types of divergences usually occur in overbought/oversold territory. This is usually the most reliable signal.
Using MACD indicator in combination with other indicators
Here’s how to combine the MACD indicator with other indicators when trading:
Using MACD in combination with a Stochastic indicator
MACD and Stochastic are both important tools in technical analysis. Of these, the Stochastic indicator, developed by Dr. George Lane in the 1950s, is still considered an effective tool for traders.
Stochastic measures price momentum by comparing the closing price of an asset to its price range over a given period. When prices are rising, the closing price is usually near the upper end of the price range. When prices are falling, the closing price is usually near the lower end of the price range.
Combining Stochastic and MACD helps investors assess the market more accurately. MACD, formed from two moving averages, creates divergence/convergence signals. Using both indicators helps investors predict price trends and reversal times more accurately. When combining Stochastic and MACD, an overbought signal appears when the indicator crosses the 10 level. While an oversold signal appears when the indicator is below -10.

Using MACD combined with RSI indicator
Combining MACD with RSI indicator gives a comprehensive view of the Crypto market. In which, MACD measures the difference between two EMA lines. While RSI focuses on price movements in the near term. Although both these indicators measure the momentum in the market, their approaches are different. This leads to signals that sometimes contradict each other. However, when both indicators give the same signal, their reliability is high. It provides certainty to investors.
MACD and RSI work as complementary software. While RSI predicts price trends to identify overbought or oversold points. MACD helps to determine price trends and entry points accurately.

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What should be noted when applying MACD meaning?
Timeframe Note: To get the most out of Moving Average Convergence Divergence, it is important to analyze charts on both long and short timeframes. For day trading, using weekly or extended timeframe candles may yield the best results.
Zero Crossover: This is the intersection between the MACD line and the horizontal line. Trading decisions should be based on a specific analysis of each situation. If there is a change from negative to positive, this indicates that the price is likely to increase, and vice versa.
Noise and probability principle: Every indicator can be affected by market factors. Careless analysis can lead to risks and losses. Therefore, investors should use and combine many different indicators. To increase accuracy and minimize risks.
Conclude
Up to now, MACD has become an extremely useful technical analysis tool. Besides its ease of use, it also helps to analyze the market effectively, especially in determining market trends and momentum. Through the above article, Crypto Trading has fully conveyed information about MACD meaning and how to use it effectively in trading. Hopefully, this article will bring value and support to investors, don’t forget to follow the next content to accumulate more investment knowledge for yourself!
Frequently Asked Questions
MACD meaning and how does it work?
MACD (Moving Average Convergence Divergence) is a popular technical indicator used to identify trends and measure market momentum. It is created by taking the difference between two moving averages of a stock or asset’s price.
How to use MACD meaning?
MACD is commonly used to identify buy and sell signals. When the MACD line crosses above its moving average (signal line), this is typically a buy signal. When the MACD crosses below its moving average, this is a sell signal.
What do crossovers on MACD mean?
Crossovers on the MACD line often indicate a change in the momentum of a price trend. Crossovers to the upside can indicate an upcoming price increase, while crossovers to the downside can indicate a bearish reversal.