TREND-FOLLOWING STRATEGY
During range periods, the two lines from your MACD are usually very close together and they hover around the 0-line; this means that there is no momentum and no strength in the market.
Let's take a look at the chart study below to understand how the MACD helps us understand the different market periods.
At point #1, the price traded in a narrow range while the MACD lines hovered closely around the 0-line and constantly crossed each other. When the price broke out, the two indicator lines pulled away from the 0-line and separated from each other.
You can also draw trendlines or support and resistance levels directly on your MACD indicator. A breakout of the MACD is another important momentum signal.
During the following trend, the MACD lines stayed well above the 0-line, confirming the overall bullish sentiment. The Moving Averages on the price chart can be a great add-on for a trend-following trading approach; they keep you in trends until the Moving Averages have been broken.
The price entered a sideways consolidation period at point #3. The MACD pulled back all the way to the 0-line during the consolidation. The breakout of the MACD lines and the price action led to the next trending phase.
During the trending phase (#4) the MACD stayed above the 0-line once again. As long as the MACD is above 0, the bullish trend is valid.
At the top (#5), the price made higher highs whereas the MACD made lower highs. This is a classic divergence signal. A divergence signals a loss in trend momentum and is a strong reversal pattern.
After the divergence, the price reversed strongly to the downside and the MACD fell below the 0-line for the first time. This started the new down-trending period with the MACD staying below 0 all the way.
Look at the data and make your conclusions…let’s learn how to make good decisions…
Have a look at your coins…what is your conclusion…
Source :Tradeciety
