MACD

MACD, short for Moving Average Convergence Divergence, is a momentum indicator built from the difference between two exponential moving averages of price, typically the 12-period and 26-period EMAs. That difference is the MACD line; a 9-period EMA of the MACD line, called the signal line, is plotted alongside it, and a histogram shows the gap between the two. When the MACD line crosses above the signal line, short-term momentum is strengthening relative to the recent past; crossing below indicates the opposite.

For example, after a pullback in Ethereum, a trader might wait for the daily MACD line to cross back above its signal line while the histogram flips positive before re-entering, treating the crossover as evidence the correction is losing force. Crosses of the zero line — where the 12 EMA moves above or below the 26 EMA — are read as broader trend shifts.

Traders also watch MACD divergence, where price makes a new extreme but MACD does not, hinting momentum is fading. A common misconception is that MACD crossovers are precise buy and sell signals; because the indicator is built from lagging moving averages, it whipsaws badly in sideways markets and performs best as a trend-confirmation tool on higher timeframes.