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Necessary cookies are absolutely essential for the website to function properly. If the histogram is negative below the zero line this indicates that the MACD line is beneath the signal line, and we should predict a bearish movement.

A bullish MACD divergence emerges when the price of the crypto makes a lower low downtrend but the MACD makes a higher low. This indicates a reversal.

A bearish MACD divergence emerges when the price of the crypto creates a higher high uptrend but MACD creates a lower high. This implies that whilst the price is still in an upward trend, the momentum in the upswing has reduced. This MACD trading strategy can suit crypto and Forex traders who look for a possible early entry by depending on the MACD histogram. Because the histogram bars have a faster setting 9 periods than either the two moving average lines or the signal line, resulting in a timelier trigger.

Another tip that can be useful for us dealing with the MACD histogram in the crypto and the Forex markets is,when we notice that the histogram is no longer increases in height and produces smaller bars, we should forecast a trend shift.

As it shows in the chart above, the histogram is no longer increases in height and the bars become smaller and smaller. Also, we notice that the MACD bars cross below the zero line and the signal line. So a shift from the upward trend to the downward trend. Briefly, the MACD trading strategy is a simple and strong tool in the ranging cryptocurrency markets. It can be employed in different forms, by relying on the divergences, the crossovers, or the histogram.

Every system provides a better way to analyze charts. But, none of them can secure any returns, because they deliver only some probabilities about the future direction of the coins market. Every opinion or information included on our website is only general in nature. To clarify, our analytics tools and our courses do not represent individual advice or investment recommendations or investment advice.

Macd Trading Strategy guidelines. MACD Trading Strategy. Combine RSI with MACD to build a Trading Strategy As you incorporate the MACD and the RSI with our PDF document into your crypto or Forex trading strategy, you will likely increase the possibility of making the right trading decisions. In fact, these two indicators can offer value in: Validating trade opportunities. Timing orders to optimize the risk management practices.

Therefore, this trading system can confirm a shift in momentum that we may use to: Time our exit from a position Plan a new order that aims to capitalize on this opportunity.

On the other hand, we notice that there is a bullish divergence. MACD crossover strategy examples The MACD crossover strategy is very used by day traders in the FX exchange. When the MACD bars turn up and cross over the zero line in an uptrend, it can be a good entry trigger. An exit signal sell signal is when the MACD bars cross below the zero line in a downward trend.

Example 1 : Bullish MACD crossover A bullish signal is present when the MACD histogram crosses above the signal line and is under the zero line. Example 2 : Bearish MACD crossover A bearish crossover occurs when the MACD histogram turns down the signal line and is above the zero line. Example 3 : MACD divergence We will watch for divergence between the MACD bars and the asset price to spot potential reversals.

We must take into consideration that:. MACD histogram strategy examples In this MACD trading strategy, the difference between the two moving average lines and the signal line is represented by MACD histogram bars. Example 1 A bullish MACD divergence emerges when the price of the crypto makes a lower low downtrend but the MACD makes a higher low.

Example 2 A bearish MACD divergence emerges when the price of the crypto creates a higher high uptrend but MACD creates a lower high.

Example 3 As it shows in the chart above, the histogram is no longer increases in height and the bars become smaller and smaller. Conclusion Briefly, the MACD trading strategy is a simple and strong tool in the ranging cryptocurrency markets. Course reviewed by:. Med Kerkeni More Courses. August 25, Prev Previous. Next Next. You might like ». How to use Crypto Moving Average? Ameni Skhiri August 24, Learn Wedge patterns.

Oscillating indicators are to show securities when they are overbought or oversold allowing a trader to enter at the best possible price. There are different types of momentum oscillators a trader can use, and the MACD is one of the most popular.

In this guide we are going to concentrate on the MACD and how to combine with other strategies to enhance a trading strategy. NOTE: Get the Free MACD PDF Guide Download Below. Free PDF Guide: Get Your MACD Trading Strategies PDF Guide. Not including the moving average, the MACD is the second most popular trading indicator. The Moving Average Convergence Divergence MACD is a technical indicator used to identify new trends or momentum and show the connection between the price of two moving averages.

MACD fluctuates above and below zero lines, highlighting both momentum and trend direction as the moving averages converge and divergence. Your MACD line is the day exponential moving average EMA less the day exponential moving average EMA. You can use closing price for this moving average. The 9-day EMA acts as a signal line and identifies turns because it is plotted with the indicator.

For the histogram, it represents the difference between MACD and its 9-day EMA Signal Line. If the MACD line is above its Signal Line then its positive and if the MACD line is below its Signal Line, then it is negative. You can substitute other values depending on your preference and goals. MACD has two moving averages with different speeds. In other words, one will be quicker to react to price swing movements than the other one.

If a new trend occurs, the fast line will start to cross the slower line. For this reason, the fast line will diverge or move away from the slower line, often indicating a new trend. You can see in the image above that when the lines cross, the histogram temporarily disappears because the difference between the lines at that time is 0.

If moving averages move towards each other, it means that a Convergence is occurring. On the other hand, a divergence occurs when the moving averages move away from each other.

There are three different methods to interpret Moving Average Convergence Divergence MACD. It trails average line and helps determine the turns in the MACD. It shows bullish crossover when the MACD crosses above the signal line, and a bearish crossover if it turns below the signal line. As shown above, the chart clearly shows how a buy entered after the bullish crossover can be profitable. This strategy can also be used to manage or close a short entry. When the MACD line moves above the zero line to turn positive, then a bullish center-line crossover occurs.

This occurs when the day EMA moves above the day EMA. If the MACD line moves below the zero line to turn negative, then it is a bearish center-line. This occurs when the day EMA moves below the day EMA. This shows a point where the MACD does not follow price action and deviates.

The use of Relative Vigor Index is to measure the strength of a trend by comparing the closing price of a security to its price range and smoothing the results with EMA. In fact, the basic point of combining these tools is to match crossovers. To put it differently, if one of the indicators has a cross, you wait for a cross in the same direction as the other one. If it occurs, you buy or sell the equity and hold your position until the MACD gives you a signal to close the position.

See image below;. The chart above is the minute chart of Citigroup from December , It illustrates that there are two short and one long setups that occur after a crossover between the MACD and the RVI. The green circles are crossovers and the red circles are where the position should have been closed. The Money Flow Index — MFI is a type of oscillator that uses both price and volume on measuring buy and sell pressure. It generates less buy and sell signals compared to other oscillators, for the reason that the money flow index requires both price movements and surge to make extreme readings.

If the MFI gives you a signal of a bearish cross over the MACD lines, there is a potential short trade. This strategy is the same way in the opposite direction for long trades. The chart above is the minute chart of Bank of America BAC. The green circle is the moment when the MFI is signaling that BAC is oversold.

After 30 minutes, the MACD has a bullish signal and is now open for a potential long position at the green circle highlighted on the MACD. You hold your position until the MACD lines cross in a bearish direction as shown in the highlighted red circle on the MACD.

To sum up, this position lets you profit an amount of 60 cents per share for about 6 hours. The use of Triple Exponential Moving Average — TEMA is to filter out volatility from conventional moving averages. It is made up of a single exponential moving average, a double exponential moving average, and a triple exponential moving average.

It can generate a trade signal when the fast line crosses the MACD and the price of a security breaks through the TEMA. You will exit positions whenever you receive contrary signals from both indicators. The image below is the minute chart of Twitter. In its first highlighted green circle you can clearly see that you have the moment when the prices switch above the period TEMA. The MACD confirms a bullish TEMA signal on the second highlighted circle. This is when you open your long position.

As shown above, the price increases and you get your first closing signal from the MACD in about 5 hours. The price of twitter breaks the period TEMA in a bearish direction after 20 minutes and you close your position. As can be seen, it generated a profit of 75 cents per share. The use of a Triple Exponential Average — TRIX is to be a momentum indicator. It is an oscillator used to identify oversold and overbought markets.

This gives you the tighter and more secure exit strategy. You exit the market right after the trigger line breaks.

This strategy is riskier because if there is a significant change in trend, you are in your position until the zero line of the TRIX is broken. It could take a while for that to happen. The image above shows the minute chart of eBay. As shown above, the first green circle is a long signal that comes from the MACD.

The second highlighted green circle is when the TRIX breaks zero and you enter a long position. On the other hand, the two red circles show contrary signals from each indicator. In the first case, the MACD gives you the option for an early exit, while in the second case, TRIX keeps you in position. By using the first exit strategy, you would have gained a profit of 50 cents per share, while the alternative approach will generate a profit of 75 cents per share.

The use of this indicator is to measure market momentum. The Awesome Oscillator calculates the difference of the 34 and 5-period Simple Moving Averages. You will enter and exit the market only when you receive a signal from the MACD, confirmed by the awesome oscillator. Below is the minute chart of Boeing. The two highlighted green circles are signals that indicate to open a long position. The Awesome Oscillator gives you a contrary signal after going long. Yet, the MACD does not produce a bearish crossover, so you stay with your long position.

The first red circle highlights when the MACD has a bearish signal. The second red circle highlights the bearish signal generated by the AO and you close your long position. The best thing about the MACD indicator is that it brings together momentum and trends into one indicator. I hunt pips each day in the charts with price action technical analysis and indicators. My goal is to get as many pips as possible and help you understand how to use indicators and price action together successfully in your own trading.

Skip to content. Table of Contents. Featured Brokers IC Markets. Tightly regulated around the world Small minimum deposit Superior trader support Latest trading platforms Very small trading costs. Trade Now. Pip Hunter I hunt pips each day in the charts with price action technical analysis and indicators.

Trading the MACD. Put them together and you have the perfect combination for a trend following strategy. Trading just with the MACD does not provide much clue. Non-necessary Non-necessary. Selling based on Bearish zero line cross over may give away too much of your profit. See the Chart enclosed.

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