Today im going to show you how to use Bolinger Bands and MACD together to understand where the price is going.
So you can swing trade easily.
By the way swing trade is holding assets for profit for more than a day.
So this strategy is suitable for novice investors. But you will need practice before applying this to your trading strategy!
First of all i do not recommend betting against the market.
Do follow the trend when using this strategy. If the trend is upwards do not short the asset.
But there can be breakout from the existing trend.
Therefore we can also use trendlines to have better understanding of the market.
Lets identify indicators that we are going to use then i will explain how to use them to swing trade.
MACD measure specific EMAs and their relations. EMAs are mainly 12 period EMA and 26 period EMA.
There are 2 lines and 1 histogram on MACD. They are called, MACD line, Signal line, Histogram.
MACD line = 12 EMA - 26 EMA
Signal line = 9 EMA of MACD line
Histogram = Difference between MACD line and Signal line
We use MACD to identify trends so we can trade accordingly.
If the MACD line is above 0, we are in a uptrend.
If the MACD line is below 0, we are in a downtrend.
If the MACD line is above or crosses above signal line it is a buy signal.
If the MACD line is below or crosses below signal line it is a sell signal.
Longer histograms and being too far away from zero line means momentum of the trend is high.
These are the basic of MACD.
Bolinger Band is easier to grasp than MACD.
There is an upper channel and lower channel calculated with volatility and 2 Standard Deviations from 20 Simple of MA line.
Generally if the price is closer to the upper band, market is considered overbought and vice versa.
If the market is highly volatile bands widen and if volatility is low bands contract.
The most important thing about BB is 20MA. Generally price will test 20MA line after it hits the upper or lower band.
If price breakout or rejceted from it, trend is established.
So how can we combine both of them to swing trade successfully?
1- We have to identify the market trend. We can simply draw a trendline on the chart to identify it.
2- Use 20 MA as entry-exit
3- Look MACD histogram for momentum
4- Use lower - higher band as SL-TP
Example;
Look at the chart on the left!
Feb 04 19, uptrend started and MACD signal buy.
But there is no momentum.
MACD far away from zero line and price far away from 20MA.
Wait until price breakout from 20MA.
1- is the confirmation of trend with momentum rising and price breakout above 20MA line. BB start to widen meaning high volatility.
You can enter long trade here since price and momentum rising with volatility.
2- is the upper band of BB. This is take profit levels.
If you are seasoned enough you can open short position here with 20MA area TP.
3- Test of 20MA. You can enter short or long here with lower BB being SL - TP.
But with MACD signaling sell and losing positive momentum in histogram, short seems to be the RIGHT CHOICE.
4-Price cant hold 20MA. Drop to the lower band. SL-TP zone.
If you are seasoned enough, potential entry zone for long trade. TP being with 20 MA zone.
Lets take a look at the chart on the right.
Same chart, after a couple of weeks from chart 1.
There is a clear uptrend that started 09 March 20.
1- At 20 April MACD signal buy but there is no momentum and price was still below MA20.
It is logical to wait for confirmation which is the breakout of MA20.
2-Price breakout MA20 after a week.
Between 27 April - 05 Oct, there are more than couple times that market offers good entry zones.
Between this time, MACD momentum and lines are rising to the positive-buy zone.
3- Price is around upper band for a long time. Could be a TP zone.
Price also lost %25 value 2 in weeks. Some people use here as TP zone.
But MACD lines and histogram were positive.
Price didnt test the 20MA.
Also BB is still widening. Meaning high volatility in a bull market.
Opening short is not logical here.
4- Last time price touched the upper band.
Histogram started to lose momentum.
Potential TP zone and short entry.
To be honest this seems to be a good point for short trade but didnt work out.
Price went up (2. ATH) couple of weeks later with MACD momentum nearly finished.
Therefore always put SL-TP with your orders.
5- MACD signaling sell.
Low negative momentum.
If open short here, it could be like NO.3 on the chart.
Wait for confirmation.
6- Price test MA20.
After couple of weeks we broke down MA20. Bear confirmed.
Momentum rapidly increase to the negative zone.
Potential short entry.
7-Price cant hold MA20.
Lower BB reached.
Possible SL-TP area.
So sign from MACD to enter a long trade just yet.
8- Possible long entry with MA20 breakout above.
MACD signal buy with low momentum. Therefore wait for confirmation is logical.
After a week momentum rises.
Long entry seems logical.
New ATH for BTC.
So in short,
Identify a trend!
Check MACD for momentum and trend strength.
Enter when price breakout MA20.
Confirm the breakout before enter!
TP-SL at the MA20 and Band limits.
So you can swing trade easily.
By the way swing trade is holding assets for profit for more than a day.
So this strategy is suitable for novice investors. But you will need practice before applying this to your trading strategy!
First of all i do not recommend betting against the market.
Do follow the trend when using this strategy. If the trend is upwards do not short the asset.
But there can be breakout from the existing trend.
Therefore we can also use trendlines to have better understanding of the market.
Lets identify indicators that we are going to use then i will explain how to use them to swing trade.
MACD measure specific EMAs and their relations. EMAs are mainly 12 period EMA and 26 period EMA.
There are 2 lines and 1 histogram on MACD. They are called, MACD line, Signal line, Histogram.
MACD line = 12 EMA - 26 EMA
Signal line = 9 EMA of MACD line
Histogram = Difference between MACD line and Signal line
We use MACD to identify trends so we can trade accordingly.
If the MACD line is above 0, we are in a uptrend.
If the MACD line is below 0, we are in a downtrend.
If the MACD line is above or crosses above signal line it is a buy signal.
If the MACD line is below or crosses below signal line it is a sell signal.
Longer histograms and being too far away from zero line means momentum of the trend is high.
These are the basic of MACD.
Bolinger Band is easier to grasp than MACD.
There is an upper channel and lower channel calculated with volatility and 2 Standard Deviations from 20 Simple of MA line.
Generally if the price is closer to the upper band, market is considered overbought and vice versa.
If the market is highly volatile bands widen and if volatility is low bands contract.
The most important thing about BB is 20MA. Generally price will test 20MA line after it hits the upper or lower band.
If price breakout or rejceted from it, trend is established.
So how can we combine both of them to swing trade successfully?
1- We have to identify the market trend. We can simply draw a trendline on the chart to identify it.
2- Use 20 MA as entry-exit
3- Look MACD histogram for momentum
4- Use lower - higher band as SL-TP
Example;
Look at the chart on the left!
Feb 04 19, uptrend started and MACD signal buy.
But there is no momentum.
MACD far away from zero line and price far away from 20MA.
Wait until price breakout from 20MA.
1- is the confirmation of trend with momentum rising and price breakout above 20MA line. BB start to widen meaning high volatility.
You can enter long trade here since price and momentum rising with volatility.
2- is the upper band of BB. This is take profit levels.
If you are seasoned enough you can open short position here with 20MA area TP.
3- Test of 20MA. You can enter short or long here with lower BB being SL - TP.
But with MACD signaling sell and losing positive momentum in histogram, short seems to be the RIGHT CHOICE.
4-Price cant hold 20MA. Drop to the lower band. SL-TP zone.
If you are seasoned enough, potential entry zone for long trade. TP being with 20 MA zone.
Lets take a look at the chart on the right.
Same chart, after a couple of weeks from chart 1.
There is a clear uptrend that started 09 March 20.
1- At 20 April MACD signal buy but there is no momentum and price was still below MA20.
It is logical to wait for confirmation which is the breakout of MA20.
2-Price breakout MA20 after a week.
Between 27 April - 05 Oct, there are more than couple times that market offers good entry zones.
Between this time, MACD momentum and lines are rising to the positive-buy zone.
3- Price is around upper band for a long time. Could be a TP zone.
Price also lost %25 value 2 in weeks. Some people use here as TP zone.
But MACD lines and histogram were positive.
Price didnt test the 20MA.
Also BB is still widening. Meaning high volatility in a bull market.
Opening short is not logical here.
4- Last time price touched the upper band.
Histogram started to lose momentum.
Potential TP zone and short entry.
To be honest this seems to be a good point for short trade but didnt work out.
Price went up (2. ATH) couple of weeks later with MACD momentum nearly finished.
Therefore always put SL-TP with your orders.
5- MACD signaling sell.
Low negative momentum.
If open short here, it could be like NO.3 on the chart.
Wait for confirmation.
6- Price test MA20.
After couple of weeks we broke down MA20. Bear confirmed.
Momentum rapidly increase to the negative zone.
Potential short entry.
7-Price cant hold MA20.
Lower BB reached.
Possible SL-TP area.
So sign from MACD to enter a long trade just yet.
8- Possible long entry with MA20 breakout above.
MACD signal buy with low momentum. Therefore wait for confirmation is logical.
After a week momentum rises.
Long entry seems logical.
New ATH for BTC.
So in short,
Identify a trend!
Check MACD for momentum and trend strength.
Enter when price breakout MA20.
Confirm the breakout before enter!
TP-SL at the MA20 and Band limits.