The Advanced MACD indicator is the most accurate indicator that reflects the current market fluctuations. Therefore, it helps investors make the most accurate trading decisions. So what is the advanced MACD indicator? How to use this indicator effectively in Crypto? Let’s explore the details of Crypto Trading through the content of the article below.
What is the Advanced MACD indicator?
Advanced MACD indicator is one of the important indicators used in Crypto. It stands for Moving Average Convergence Divergence. This line is also known to many investors as the moving average divergence line.
The MACD indicator appeared in 1979 by inventor Gerald Appel. And just like that, it became the most popular indicator used by many people in the process of investing in cryptocurrencies.
The MACD line is determined from the difference between two exponential moving averages. The cycle of these two lines is usually 12 days and 26 days. This indicator consists of 4 main parts. Specifically: MACD line, signal line, histogram, Zero line. Each component will have the above characteristics and meanings.
Hopefully, the above information can help you understand the concept of What is MACD indicator. This will help you make better investment decisions.
How to trade MACD indicator?
Because the structure of the MACD indicator is complex, the way to trade with it will vary depending on the investor. Below are the most common but effective ways to use the MACD line that you can refer to:
Take a trade when the MACD indicator and the Signal line cross each other
You can make an investment transaction when the MACD indicator and the Signal line intersect. This is also the most used investment method.
When the MACD intersects the Signal Line from below to above the Zero line. This is a sign that the market is bullish. At this time, you should take the “BUY” action to buy more investment products.
When MACD crosses the Signal Line and goes from top to bottom of the Zero line. This shows that the market is falling. At this time, you need to perform the “SELL” operation to limit possible risks.
However, the process of investing in Crypto is not simple. You should not only apply this way to make transactions but also practice observing the market before placing orders. If you only see these two lines intersect and place orders, you will most likely lose.
See more: Know MACD for perfect crypto transactions
Using Advanced MACD on Two Time Frames
Using the Advanced MACD indicator combined with multiple periods is the way you use this indicator effectively. This is a way to help traders reduce risks compared to the above method. When you have grasped the market trend, you only need to rely on the intersection line in many cases to bring high efficiency in investment.
The principle of this method is quite scientific. You need to determine the market trend in the larger time frame. Then, based on the smaller time frames, find the appropriate entry point.
The simplest way to determine a trend is to apply Dow’s theory. In an uptrend, it will create higher highs and higher lows. In a downtrend, it will create lower lows and lower highs.
Once you have identified the market trend, you just need to look for entry points in smaller timeframes. These timeframes can be H4 or H1 based on the formula below:
- With D1 being an uptrend: Find an entry point at H1 when the price falls and adjust with the MACD line cutting the Signal Line from bottom to top.
- With D1 being a downtrend: Find an entry point when the price is recovering and the MACD line cuts the Signal Line from top to bottom.
Trade coin MACD indicator with reversal candlestick pattern
You can trade the MACD coin indicator with the reversal candlestick pattern to invest in Crypto. This is considered one of the simplest but most effective ways.
This is a combination of double, divergence, and convergence. This shows that one of the two sides may no longer have the opportunity to push the price up or down. At the same time, at this time, when a reversal candle appears, this is the ideal time to enter an order.
Trading with other indicators along with the MACD indicator
This is considered a way to combine 2 momentum indicators. Specifically, it is a combination of indicators such as MACD Stochstactic, MACD RSI, … with MACD. The Stochastic indicator is used to compare the closing price of virtual currency within the price range in a certain period of time. The MACD indicator is formed from 2 moving averages that create divergence and convergence.
Therefore, this will help traders determine price momentum as well as find the price reversal point. Therefore, you should use this method to make Crypto investment transactions to achieve the expected results.
See more: OKX: open an OKX account – Reputable crypto exchange
Things to keep in mind when using the advanced MACD indicator
In addition, during the use Advanced MACD indicator, you need to note the following. To minimize possible bad problems, specifically:
- Time: Traders should carefully consider the chart axis from long-term to short-term. This helps to maximize the meaning of the MACD line. You can use weekly candles if you trade every day. Or, you can also extend the time to achieve the best results.
- Zero Crossover: This is the case of the MACD and the horizontal line crossing. Observe the green and red square signals on the initial chart carefully. Then consider making a reasonable decision to buy/sell your virtual currency. If the trend changes from negative to positive, the price will increase. If the trend changes from positive to negative, the price will decrease.
- Probability and noise principle: The main reason for losses in crypto investment is placing orders when stocks appear. However, there are also many cases where noise signals lead to incorrect decisions.
Conclude
Above is all the information about the Advanced MACD indicator as well as all the knowledge related to this indicator. Hopefully, the above useful information can help you understand the concept of MACD in Crypto as well as how to use it to achieve the best results. In addition, you should also learn about other indicators at Crypto Trading to know how to operate and combine them together to optimize your investment results.
FAQs
How to avoid fake signals from the MACD line?
To avoid false signals from the MACD indicator. You should combine MACD with other indicators. Specifically, RSI, Bollinger Bands, or moving averages,… to confirm the signal. You can also evaluate the trading volume to confirm the MACD signal. Strong signals often come with high trading volume.
How to adjust the parameters of the MACD indicator?
The default settings for the MACD are usually 12, 26, and 9. But you can customize these settings to suit your trading style. For example, for short-term trading, you can use 5, 13, and 9 to reflect faster movements.
What are common mistakes when using advanced MACD?
Common mistakes you may encounter while using advanced MACD can be: Not combining with other analysis tools, and not adjusting parameters properly,…
