1. MACD indicator explanation

1. Concept Definition

MACD (Moving Average Convergence Divergence) is about the relationship between two moving averages. One is a fast line and the other is a slow line. Basically, the function of the MACD indicator is to judge and speculate the change or continuation of the price trend.

2. How to turn on the MACD indicator?

Open the indicator library, search for the MACD indicator, and select it. The MACD indicator will appear below.

BTC/USDT Binance ₮66997.99, switch to BTC 1 hour. Set MACD call 1, spot. We can use this original setting without making too many changes. The original parameters are short period (N1) 12, long period (N2) 26 and DEA period (M) 9.

3. Green Line and Orange Line

The green line (DIF, fast line) is the difference between the short-term (12-period) EMA and the long-term (26-period) EMA, also known as the "fast line". It reflects market changes in a shorter time span and is therefore more sensitive than the slow line.

The orange line (DEA, slow line) is the 9-period EMA of DIF, also called the "slow line". It is a smoothed line calculated by DIF, reflecting market changes over a longer time span, so it is smoother and more lagging than the fast line.

The MACD energy column shows the difference between DIF and DEA. Based on these three factors, we can determine the trend and momentum changes of the market.

2. MACD Golden Cross and Dead Cross Trading Strategy, Hold Your Fist for Warmth Jiawei; ETH2458

When the price is in a downward trend, the fast line crosses the slow line upward, which is called a golden cross. This means that the trend is about to change from a downward trend to an upward trend, which is a long trading opportunity.

Next, now that the price is in an upward trend, the fast line crosses the slow line downward, which is a death cross. This means that the trend will change from rising to falling, so this is a reasonable short entry point.

This is the traditional use of MACD.

3. MACD divergence trading strategy

1. MACD top divergence

When the price makes a higher high than the previous one, this is a top-to-top high.

In theory, MACD should also form a top-to-top high to correspond to the price trend momentum, but at this time, MACD forms a top-to-top low, and the price trend momentum shows signs of weakening. The second high point in the figure is higher than the first one, which is the top-to-top high.

When the price forms a top high, but MACD forms a top low, this is a top divergence. When the price forms a top high, but MACD forms a top low, this is a top divergence. The price trend is likely to turn downward.

We need to find the key price + MACD trend reversal divergence to confirm the trend.

2. MACD bottom divergence

The price low is lower than the previous one, which is the bottom low.

However, MACD formed a bottom-to-bottom high, which means that the buyer's momentum began to intervene and the price decline momentum gradually weakened.

The trend will most likely change from a downward trend to an upward trend. When the price forms a bottom low, but the MACD forms a bottom high, this is a bottom divergence. When a bottom divergence is formed, it means that the trend will most likely change to an upward trend, which is a reasonable opportunity to buy and go long.

3. Trading strategy for MACD trend reversal

Key price + MACD trend reversal divergence, as long as two vertices are found to connect the lines, the bottom macd also finds the corresponding two vertices.

The first step is to determine the key support level. We can see that the price has tested this support level many times and has risen a large wave, so this one is the key support level. When the price returns to this key support level again, we can look for long trading signals.

For example, we find a peak that has gone through a round of ups and downs and returned to the support level.

However, please note that you cannot go long yet because we need one more signal to confirm that this bottom divergence is valid, so we draw a downward trend line here.

You can see that this is a descending wedge triangle, which is a bullish chart pattern. When the price breaks out of this descending wedge triangle, we can enter the market to do long.

If these two points are met and the downtrend line is broken, we can consider going long. Or we can draw a line at the previous high of the downtrend. When the price breaks through the previous high, it means that the trend has been broken. The price is likely to change from a downtrend to an uptrend. We can go long after the price breaks through the previous high. In short: key price + MACD trend reversal divergence.

4.How to find the support level?

The support level can be understood as multiple retracement points, forming a valley or a peak, and there will be multiple retracements at the foot of the mountain. It can be a small range of prices or a point. We just talked about MACD divergence + key price. The key price is whether this support level has been broken.

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