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Crypto Terms:  Letter M
Jun 19, 2023 |
updated Apr 03, 2024

What is Moving Average Convergence Divergence (MACD)?

Moving Average Convergence Divergence (MACD) Meaning:
Moving Average Convergence Divergence (MACD) - a technical analysis indicator.
2 minutes

Let's find out Moving Average Convergence Divergence (MACD) meaning, definition in crypto, what is Moving Average Convergence Divergence (MACD), and all other detailed facts.

Moving Average Convergence Divergence (MACD) is a technical analysis technique. It is a section of a trend-following momentum pointer that reveals the interactions among two price-moving averages.

It was created in the 1970s by Gerald Apel and is widely utilized by cryptocurrency traders to evaluate market momentum, and reveal possible entry and exit points alongside price behaviors.

The calculation is carried out by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA.

The MACD line is the outcome of the computation. The "single line," a nine-day EMA of the MACD displayed on top of the MACD line, can therefore operate as a trigger for buy or sell signals. MACD indicators may be interpreted in a variety of ways, but the most popular include crosses, divergences, and quick rises/falls.

There are mainly two types of moving averages:

  • Exponential moving averages
  • Simple moving averages

Simple moving averages prioritize fresher data, but exponential moving averages prioritize all data equally. To calculate the MACD Indicator, subtract two exponential moving averages from one other and plot the resulting values to form the MACD line.

The MACD line then is utilized to calculate another exponential moving average which showcases the impulse line. The MACD histogram, on the other hand, reveals the difference between both lines.

Meaning that both lines and the histogram swing both below and above a line called the zero-line.

All in all, a moving average, which is utilized to calculate MACD, reveals the average value of past data over a particular time period.

Is MACD a Leading Indicator, or a Lagging Indicator?

The MACD indicator is a lagging indicator. Besides, all of the data used in MACD is based on the stock's previous price behavior. Because it is based on previous data, it will always "lag" the price. 

Nevertheless, a few traders utilize MACD histograms to forecast when a trend might shift. This element of the MACD may be seen as a leading predictor of future trend shifts by these traders.