Quick glance: We have come up with another tutorial to maximise the potential of MACD in capturing a trend. In this tutorial, we discuss the use of MACD in different time frames in crypto-trading.
First let us understand how is the MACD histogram calculated?
But then, MACD is a lag indicator! Then how do we predict future movements with it?
Since the Signal Line is the EMA of the MACD line, it lags the value of MACD. Therefore, when MACD > Signal Line, the market has an overall positive sentiment. When MACD < Signal Line, the market has an overall negative sentiment. Thus when MACD Histogram is positive, bullishness is anticipated. When MACD Histogram is negative, bearishness can be anticipated.
Hence the following buy/sell signals can be generated:
Buy when:
MACD Histogram > 0
MACD crosses up Signal Line
Sell when:
MACD Histogram < 0
MACD crosses down Signal Line
T1: 1D timeframe
T2: 1H timeframe
Please note:
The fact that there were minimum/none false signals generated shows how beautifully we filtered the false signals using MACD Histogram in multiple time-frames to determine the overall trend first and then generate the buy/sell signals.
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Any feedback and suggestions would help in further improving the analysis! If you find the analysis useful, please like and share our ideas with the community. Keep supporting :)
- Mudrex
First let us understand how is the MACD histogram calculated?
- The MACD-Histogram measures the distance between MACD and its signal line (the 9-day EMA of MACD).
- Like MACD, the MACD-Histogram is also an oscillator that fluctuates above and below the zero line.
But then, MACD is a lag indicator! Then how do we predict future movements with it?
Since the Signal Line is the EMA of the MACD line, it lags the value of MACD. Therefore, when MACD > Signal Line, the market has an overall positive sentiment. When MACD < Signal Line, the market has an overall negative sentiment. Thus when MACD Histogram is positive, bullishness is anticipated. When MACD Histogram is negative, bearishness can be anticipated.
Hence the following buy/sell signals can be generated:
Buy when:
MACD Histogram > 0
MACD crosses up Signal Line
Sell when:
MACD Histogram < 0
MACD crosses down Signal Line
T1: 1D timeframe
T2: 1H timeframe
Please note:
The fact that there were minimum/none false signals generated shows how beautifully we filtered the false signals using MACD Histogram in multiple time-frames to determine the overall trend first and then generate the buy/sell signals.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------
Any feedback and suggestions would help in further improving the analysis! If you find the analysis useful, please like and share our ideas with the community. Keep supporting :)
- Mudrex
