MACD is the exponential smoothed moving average of convergence and divergence, which absorbs the advantages of the moving average. The buying and selling transactions of the moving average are very effective when the trend is obvious, but once the bullish consolidation market is encountered, the signals sent by the moving average are too frequent and extremely inaccurate, which can easily cause investors to suffer under the margin leverage effect of the futures market. fatal loss.
And MACD can do just that:
1. In the bull market, it can overcome the false and frequent deceptive signals of the moving average to a certain extent;
2. In a trending market, it can ensure the effectiveness of the moving average to the greatest extent.
The MACD pattern is similar to the K-line pattern, which can be: double top, double bottom, head and shoulders bottom, head and shoulders neck, top divergence, bottom divergence, golden cross above water, golden cross below water, etc. In fact, if you observe carefully, you will find that they are all derivatives of double bottoms and double tops. We will discuss this in detail in the next article.
The MACD indicator contains several basic elements. Investors who are not familiar with it can first understand:
Golden Cross: The fast line DIF crosses the slow line DEA, which is the first day when the green column appears.
Death Cross: The fast line DIF crosses the slow line DEA, which is the first day when the red column appears.
The four major functions of MACD indicator in cryptocurrency trading
1. Help determine the bottom
When the currency price and MACD area (or DIF value) show a bottom divergence, it usually indicates the appearance of a bottom. At this time, you need to pay attention to the opportunity to buy at the bottom.
2. Help determine the top
When there is a top divergence between the currency price and the MACD area (or DIF value), it usually indicates the appearance of a top, and at this time you need to consider selling to escape the top.
3. Help judge the end of callback
After the coin price enters the bullish area, there will be a pullback. After the pullback ends, the coin price will usually continue to rise or accelerate its rise.
4. Help judge the end of the rebound
After the coin price enters the short area, there will be a rebound. After the rebound, the coin price will usually continue to fall or accelerate the decline.
The ultimate practical use of MACD indicator in cryptocurrency trading
In order to make it more practical, let's take a look at the commonly used tactics in actual combat.
Classic usage of MACD: "Reject Death Cross" and "Reject Golden Cross" tactics
1. “Reject Death Cross” – Be bold and wait for a surge
(1) MACD "rejection of death cross" means that after the DIF indicator crosses the DEA indicator upward, it maintains the upward momentum for a period of time, and then suddenly turns downward. However, when it is about to cross the DEA indicator downward, it turns upward again, resulting in a failed "death cross" trend pattern.
(2) Generally speaking, after the "rejection death cross" appears, the stock price will move upward, but the price rarely rises to the previous height.
(3) “Rejection of Death Cross” is one of the main methods of market cleansing. For friends in the cryptocurrency circle, “Rejection of Death Cross” is a very strong buy signal. When you find that the MACD indicator is about to form a “death cross”, you should pay more attention and be ready to intervene in the currency at any time.
(4) The best time to buy is when MACD forms a “rejection death cross” and starts to move upward.
Key points for MACD indicator trading:
1) When MACD appears above the zero axis and rejects the dead cross buy signal, the price of the currency has been running above the 60-day moving average, which is a strong feature and can be actively bought. Especially when the rejection of the dead cross buy signal appears above the zero axis for the first time, it should be actively bought.
2) When MACD rejects the dead cross buy signal below the zero axis, the currency price is still running below the 60-day moving average. It can be regarded as a rebound first. It is not suitable to intervene if we wait and see.
2. “Reject Golden Cross”
(1) MACD "rejection of golden cross" means that after the DIF indicator crosses the DEA indicator downward, it maintains a downward momentum for a period of time, and then suddenly turns upward. However, when it is about to cross the DEA indicator upward, it turns downward again, resulting in a failed "golden cross" trend pattern.
(2) Generally speaking, a "golden cross" is a typical buy signal, but a "rejection of a golden cross" is a typical sell signal.
(3) If after the "golden cross rejection" is formed, other signals indicating a strong buy are formed, then you can consider investing in this currency.
Key points for MACD indicator trading:
1. Similar to the rejection of the dead cross, when the rejection of the golden cross pattern occurs below the zero axis, the downward momentum it represents is stronger.
2. If the DIF line gradually approaches the DEA line and the trading volume gradually shrinks, it is a signal that the follow-up strength of the bulls is insufficient. In this case, the anti-fall signal of this pattern will be more reliable.
Summary of the MACD indicator cryptocurrency trading strategy
1. When investing in the cryptocurrency circle, you should pay great attention to whether you find that MACD is about to form a "death cross" or a "golden cross" in the trend chart. Before making a decision, you must open your eyes to see whether it is a "death cross" or a "rejection of death cross", a "golden cross" or a "rejection of golden cross".
2. During a pullback, if you find that the trading volume is constantly decreasing and the price of the currency is hovering around the important 30-day moving average, as long as the MACD indicator does not form a "death cross" or "rejection of golden cross", you can tentatively intervene.
3. When the MACD indicator forms a "rejection death cross", the currency price is bound to move upward.
