Moving Average Convergence Divergence

Moving Average Convergence Divergence, or MACD, is a trend-following momentum indicator that shows the relationship between two moving averages of an asset's price. It is calculated by subtracting the 26-period exponential moving average from the 12-period EMA.

A signal line, which is a 9-period EMA of the MACD, is then plotted on top to act as a trigger for buy or sell signals. When the MACD line crosses above the signal line, it is a bullish signal, and when it crosses below, it is a bearish signal.

In crypto, the MACD is widely used to identify the strength and direction of a trend. It helps traders distinguish between temporary pullbacks and fundamental shifts in momentum.

While effective for trend identification, it is a lagging indicator and can provide false signals in range-bound markets. It is best used as part of a broader technical analysis framework.