The MACD indicator is one of the most important and popular technical analysis tools. You can optimize your strategy through knowledge of this indicator. Let’s learn about the concept and uses of What is MACD with Crypto Trading.
General information about What is MACD?
is a popular technical tool in the cryptocurrency world. Understanding the concept What is MACD and how to apply it will increase accuracy and efficiency.
What is the MACD line?
The superior uses of the indicator raise the question for investors: So What is MACD? The (Moving Average Convergence Divergence) line is also known as the Moving Average Convergence Divergence. This is a technical indicator used to identify price trends. The indicator is based on the convergence and divergence of moving averages. This indicator helps determine the strength of an uptrend or downtrend.
Based on the concept What is MACD, this is a lagging indicator. relies on historical data to make its assessment.
Components of MACD line in Trade Coin
What are the components that make up the indicator What is MACD?
- MACD line: Calculated by the difference between the EMA (12) line and the EMA (26) line.
- Signal Line: This is considered a 9-day EMA of the line.
- Histogram: Determined by the difference between the line and the Signal line.
Components of line in Trade Coin
Instructions on how to set up the MACD indicator on MT4:
Step 1: To add the MACD indicator to the chart on the MT4 application, you can do the following:
- Open the MT4 application and go to Navigator.
- Select Indicators and then select Oscillators.
Or
- Open the MT4 application and go to the chart you want to add the indicator to.
- Click Insert, then select Indicators and then Oscillators.
Add indicator to chart on MT4 application
Step 2: Enter the values for SMA and EMA in the respective boxes. Complete the settings by pressing OK.
What is the meaning of the ((MACD) line) in trading
The MACD line helps determine the general trend of the market (up when is positive, down when is negative). At the same time, it is used to determine buy/sell points. (Buy when crosses above the signal line or Zero, sell when it crosses below). It then confirms the bullish/bearish momentum and identifies divergence/convergence on the chart. This is an important tool in making wise investment decisions.
See more: Know MACD for perfect crypto transactions
How to use MACD in-depth
The fastest way to apply What is MACD? The in-depth application of this indicator requires understanding and experience. It is important not to rely too much on this indicator. You should combine it with other factors to make accurate trading decisions.
How to recognize MACD indicator
When the MACD indicator is positive, it means that the shorter EMA is higher than the longer EMA. The larger the gap between the two lines, the stronger the rise is. This is a strong signal for an uptrend in the market.
The easiest way to identify the MACD indicator is by its color. The line is usually shown in green and the signal line in red. You can look at the position and movement of the EMA lines. When the two EMA lines move away from each other, it is usually a sign of divergence. Conversely, when the two lines move closer together, it is a sign of convergence.
When MACD is negative, the short EMA is below the long EMA. When the gap between the two EMAs widens, this shows that the is growing bearish. This is a strong signal for a bearish market.
How to calculate the MACD indicator
is the difference between the 12-day EMA and the 26-day EMA.
In there:
- EMA 12 and EMA 26 are moving averages calculated with periods of 12 and 26 days.
- The signal line is calculated using the EMA(9) line.
- The histogram is the difference between the value of and the signal line.
How to read MACD in depth
What is the significance of market performance )? It is that this indicator helps to measure the change in momentum between the average. It shows the interaction between two EMA lines on the price chart. Investors need to understand how to analyze the convergence and divergence of the moving average indicator.
- When MACD > 0: 12-day EMA is greater than 26-day EMA.
- When MACD < 0: 12-day EMA is less than 26-day EMA.
- When MACD > 0 and increasing: This shows that the price is in an uptrend.
- When MACD > 0 and decreasing: This is a sign that the price momentum is slowing down.
- When MACD < 0 and is decreasing: This indicates that the price is in a downtrend.
- When MACD < 0 and increasing: This is a signal that the price decline is starting to slow down.
How to read MACD in depth
See more: MEXC: Open a MEXC account, invest effectively
How to trade effectively with the What is MACD line
Using the MACD effectively requires understanding and experience. Always consider combining it with other factors. Do not rely too much on this indicator but apply it comprehensively and cautiously.
How to trade when the Signal line crosses the MACD line
This is a basic situation that investors should pay attention to to have effective transactions. In case the MACD crosses the Signal line from above. This shows that the market is in a downtrend and is a signal to place a SELL order.
In case the MACD crosses above the signal line. This is the ideal time to open a buy order. This is a sign that the market is likely to continue to increase shortly.
Trading steps when the Histogram shifts from negative to positive and vice versa
The histogram is calculated by the difference between the MACD line and the Signal line. The histogram changes from negative to positive, that is, from red to green. This is a sign that the market is increasing, so investors should consider placing a BUY order. The histogram changes from positive to negative, that is, from green to red. This is a sign for investors to consider placing a SELL order.
How to trade when the MACD indicator changes from negative to positive/positive to negative
It is important to pay attention to the correlation between the line and the Zero level. When the crosses above Zero, this indicates that the market is in an uptrend. This is the ideal time to place a buy order.
In this case, the Moving Average Convergence Divergence crosses below Zero. This is a sign that the market may fall, and you should consider placing a sell order (SELL).
How to trade when the MACD line in Trade Coin creates divergence/convergence
When the new price peak is higher than the previous price peak, the new MACD peak is lower than the previous peak. It reflects that the market trend is turning bullish. But this increase is gradually weakening and may be about to reverse. Investors should wait for divergence/convergence to occur. Or you can wait for a confirmation signal from the crossover between and the Signal line.
Next, draw a trend line to determine the current uptrend. In case there is a divergence or convergence but the price has not changed direction. You should be patient and not rush into trading. Wait for a clear signal that the price is about to reverse before placing an order. At the same time, you can also set support or resistance levels at the top or bottom. The purpose of this is to support the trading decision.
How to combine reversal candlestick patterns with What is MACD?
This combination suggests that ideal times to consider placing orders include:
- Where the chart shows a succession of lows and highs. This is a sign of a long-term uptrend.
- After the Doji candlestick pattern appears, the divergence becomes clear.
- At the top of the trend when a reversal candle appears.
These phenomena occurring simultaneously indicate the competition between buyers, who intend to push the price up, and sellers, who are holding an overwhelming position. See also the Parabolic SAR indicator which provides ideal buy/sell, stop, and reverse signals, contributing to the success of investors.
How to apply MACD indicator with Stochastic indicator
The Stochastic indicator measures price momentum by comparing the closing price to the price range over a given period. Often the Stochastic will change direction before the price shows signs of:
- As prices rise, the closing price tends to move towards the upper end of the price range.
- As prices fall, the closing price tends to move towards the lower end of the price range.
The combination of MACD and Stochastic helps investors assess the market more accurately. They help determine price change trends and timing more accurately.
Combining MACD indicator with RSI
Combining these two indicators will give a more comprehensive and detailed view of the investment.
Based on the concept of MACD meaning, RSI and both assess momentum in the market. However, they measure different factors, leading to sometimes different predictions. However, when both indicators give identical signals, the level of reliability will be very high.
It can be said that RSI and MACD complement each other: RSI predicts price trends to identify overbought/oversold points. While supports identifying price trends and when to enter orders.
Epilogue
MACD is a popular tool in the cryptocurrency world. But like other indicators, can be misleading due to subjective and objective reasons. Therefore, traders and investors need to continuously learn and accumulate experience. Above is the information you need to know about What is MACD. Let’s follow more interesting knowledge about cryptocurrency at Crypto Trading!
Frequently asked questions about What is MACD?
How to use MACD in trading?
There are three main signals that traders often use: Signal Line Crossover; Zero Line Crossover; and Histogram. A change from negative to positive or vice versa can also signal a trend change.
What are the disadvantages of MACD?</span>
- Time lag: Since is based on moving averages. It can be lagging and provide signals after the trend has already started.
- False Signals: In markets that do not have a clear trend, they can generate false or misleading signals.
How can MACD be combined with other indicators?
- RSI: Combine with to confirm trend and momentum.
- SMA: Use the long-term SMA to determine the main trend and to find entry and exit points within that trend.
- Bollinger Bands: Used in conjunction with to determine volatility and identify overbought or oversold points.
