Crypto Trading 101: The Moving Average Convergence Divergence

Constructing the MACD. There are three main components to the MACD indicator: the MACD line, the signal line and the histogram.

MACD line is made up of the 12-period exponential moving average minus the 26-period EMA. The signal line is the 9-period EMA of the MACD line.

The histogram plots the difference between the MACD line and the signal line.

Ways to interpret the MACD. The explanation may be hard to wrap your head around, but the MACD is one of the easiest indicators to use because of how simply it's data is visually represented.

On November 16, 2017, the MACD line made a bullish cross above the signal line, presenting a buy signal.

The MACD stayed above the signal line for over a month when the rice went on to rally more than 150 percent before its next bearish cross.

It's recommended to use the MACD in conjunction with other indicators like volume, RSI or price action because like any indicator the MACD is not 100 percent accurate and can give off false signals.

The conditions are presented when the MACD and signal line separate too far away from both one another as well as the zero line.

As can be seen, the MACD line began to stray noticeably far away from the signal line in December of 2017.

The histogram prints a bar above the zero line when the MACD is above the signal line and prints below when the MACD is below the signal line.