MACD Indicator To Enhance Your Trading Performance

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Bittime - Traders utilize the MACD indicator to spot turning points, facilitate entries during pullbacks, and capture significant portions of a move until the trend shows signs of reversal.

The Moving Average Convergence Divergence, or MACD, serves as a widely-used trend-following momentum indicator among traders. Although it operates as a lagging indicator, it proves highly valuable in recognizing potential shifts in trends.

Get to Know With MACD

The MACD fluctuates above and below a zero line, also referred to as the centerline. It calculates by subtracting the shorter moving average from a longer one to derive the MACD value. The indicator is completed by a signal line, representing the exponential moving average of the MACD.

How to Simply Read The Indicator 

The blue line signifies the MACD, while the red line denotes the signal line. A crossing of the blue line over the red indicates a buy signal, while a descent of the blue line below the red indicates a sell trigger. Moreover, a cross above the centerline also serves as a buy signal.

Let's explore how the indicator can be leveraged for improved entries and exits across various scenarios. Subsequently, we'll delve into its application during pullbacks and within an uptrend. Lastly, we'll touch upon the significance of divergences on the MACD.

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Adapting The Indicator to The Volatile Crypto Market

Compared to traditional markets, cryptocurrencies experience rapid movements within short periods. Hence, traders must act swiftly to seize significant portions of a move while minimizing whipsaw trades.

When a new uptrend commences, it usually persists for several weeks or months. However, every bullish phase undergoes corrections. Traders should aim to stay aligned with the trend and avoid being stopped out by minor pullbacks.

Early Enter and Before Reverse SIgnal Emerge

The objective is to enter the position early as the new uptrend emerges and maintain it until a reversal signal emerges. However, achieving this isn't straightforward. If the indicator generates too many signals, it results in numerous unwanted trades, incurring substantial commissions and emotional strain.

Longer Timeline to Minimize Signals Risks

On the flip side, selecting longer timeframes to minimize signals risks missing out on significant portions of the trend as the indicator lags in identifying reversals. This challenge was addressed by MACD creator Gerald Appel in his book, "Technical Analysis: Power Tools for Active Investors." Appel suggests utilizing two MACD indicators during robust trends, with the more responsive one for entries and the less responsive one for exits.

Is Two MACDs Superior to One?

The default MACD indicator value set by most charting software is the 12- to 26-day combination. However, for the examples ahead, let's employ a MACD with a 19- to 39-day combination for generating sell signals—a less responsive option. The second one, more sensitive, will utilize a 6- to 19-day MACD combination for buy signals.

Traders struggling to manage two MACD indicators may revert to the default 12- to 26-day combination.

How The MACD Can Signal Corrections

Traders can also utilize the MACD to purchase pullbacks. During corrections within an uptrend, the MACD often dips toward the signal line. As the price resumes its upward trajectory, the MACD rebounds off the signal line. This pattern, resembling a hook, presents a favorable entry opportunity.

MACD Divergences Can Also Indicate Trend Changes

Traders should exercise caution when a bearish divergence emerges and refrain from initiating long trades during such periods. The prolonged bearish divergence culminated in a substantial downturn.

This underscores the importance of waiting for price action to indicate a potential trend reversal before acting on MACD divergences.

A Few Key Takeaways

The MACD indicator captures trends and provides insights into an asset's momentum. Depending on market conditions and the asset under scrutiny, traders may adjust the MACD's period setting. For fast-moving assets, a more sensitive MACD may be preferable, while default settings or less sensitive MACDs may suit slower assets. Traders may also combine a less sensitive and a more sensitive MACD indicator for improved results.

However, no single indicator is infallible. Despite employing various permutations and combinations, trades may move counter to expectations. Traders should adhere to sound money management principles to swiftly cut losses and safeguard gains when trades align with expectations.

How To Buy Crypto From Bittime

You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti. 

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Learn How to Buy Crypto on Bittime.

Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Read also:

Get to Know with Support and Resistance Levels to Make a Better Trade

Get to Know if Bitcoin Trading is Overbought or Oversold using Bollinger Bands

How to Do Bitcoin Trading in Times of Downturn

DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.