{"id":271649,"date":"2021-06-11T03:17:32","date_gmt":"2021-06-11T00:17:32","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/"},"modified":"2021-06-11T03:17:32","modified_gmt":"2021-06-11T00:17:32","slug":"heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/","title":{"rendered":"# Here\u2019s 5 ways investors can use the MACD indicator to make better trades"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a412aca0a020\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a412aca0a020\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/#Adapting_the_indicator_to_crypto_market_volatility\" >Adapting the indicator to crypto market volatility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/#Are_two_MACDs_better_than_one\" >Are two MACDs better than one?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/#How_the_MACD_can_signal_corrections\" >How the MACD can signal corrections<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/#MACD_divergences_can_also_signal_a_trend_change\" >MACD divergences can also signal a trend change<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\/#A_few_important_takeaways\" >A few important takeaways<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Here\u2019s 5 ways investors can use the MACD indicator to make better trades <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>The Moving Average Convergence Divergence, also called the MACD, is a trend-following momentum indicator used widely by traders. Although the MACD is a lagging indicator, it can be very useful in identifying possible trend changes.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/f57c3fbb-692d-4a77-9a5f-7d2e58f5f882.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>The MACD oscillates above and below a zero line, also known as the centerline. The shorter moving average is subtracted from a longer moving average to arrive at the value of the MACD. A signal line, which is the exponential moving average of the MACD completes the indicator.<\/p>\n<p>The blue line is the MACD and the red line is the signal line. When the blue line crosses above the red line, it is a signal to buy and when the blue line falls below the red line, it is a trigger to sell. A cross above the centerline is also a buy signal.<\/p>\n<p>Let\u2019s have a look at how to use the indicator for better entries and exits from a variety of positions. Afterward, we\u2019ll investigate how the MACD is analyzed during pullbacks and in an uptrend. Lastly, we&#8217;ll take a brief look at the importance of divergences on the MACD.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Adapting_the_indicator_to_crypto_market_volatility\"><\/span>Adapting the indicator to crypto market volatility<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Compared to legacy markets, cryptocurrencies witness large movements in a short time. Therefore, the entries and exits should be quick to capture a large part of the move but without too many whipsaw trades.<\/p>\n<p>When a new uptrend starts, it <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly remains in force for a few weeks or months. However, every bull phase has its share of corrections. Traders should aim to stay with the trend and not get stopped out by every minor pullback along the way.<\/p>\n<p>The goal should be to enter the position early as the new uptrend starts and remain with the position until a trend reversal is signaled.\u00a0However, that is easier said than done. If the indicator gives too many signals, there will be several unwanted trades which will incur large commissions and be emotionally draining.<\/p>\n<p>On the other hand, if the time frames are chosen to give fewer signals, a large part of the trend could be missed as the indicator will be slow in identifying reversals.<\/p>\n<p>This problem was addressed by MACD creator Gerald <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">App<\/a>el in his book, Technical Analysis: Power Tools for active investors. <\/p>\n<p>Appel highlights how two MACD indicators can be used during strong trends, with the more sensitive one being used for entries and the less sensitive one being used for exits.<\/p>\n<p><strong><em>Related:\u00a0Unsure about buying the dip? This key trading indicator makes it easier<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Are_two_MACDs_better_than_one\"><\/span>Are two MACDs better than one?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The default value used for the MACD indicator by most charting software is the 12- to 26-day combination. However, for the subsequent examples, let\u2019s use one MACD with the 19- to 39-day combination which is less sensitive and will be used for generating sell signals. The second one will be more sensitive, using the 6- to 19-day MACD combination which will be used for buy signals.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/76cea2da-770f-4a24-a783-6294d5b99357.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Bitcoin (BTC) was trading in a small range in September 2020 and during that period, both MACD indicators were largely flat. In October, as the BTC\/USDT pair started an uptrend, the MACD gave a buy signal when the indicator crossed above the centerline in mid-October of 2020.<\/p>\n<p>After entering the trade, watch how the MACD came close to the signal line on four occasions (marked as ellipses on the chart) on the sensitive 6- to 19-day MACD combination. This could have resulted in an early exit, leaving a large part of the gains on the table as the uptrend was only getting started.<\/p>\n<p>On the other hand, notice how the less sensitive 19- to 39-day combination remained steady during the uptrend. This could have made it easier for the trader to stay in the trade till the MACD dropped below the signal line on Nov. 26, 2020, triggering a sell signal.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/9d7695a1-9c47-4bd0-aa69-4a1f4c9ada66.png\"><figcaption style=\"text-align: center;\"><em>BNB\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BNBUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>In another example, Binance Coin (BNB) crossed over the centerline on July 7, 2020, triggering a buy signal. However, the sensitive MACD quickly turned down and dipped below the signal line on July 6, as the BNB\/USDT pair entered a minor correction.<\/p>\n<p>Comparatively, the less sensitive MACD remained above the signal line until Aug. 12, 2020, capturing a larger portion of the trend. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/55680754-d42a-4502-a7a9-b8e42afc2a03.png\"><figcaption style=\"text-align: center;\"><em>LTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/LTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Traders who find it difficult to keep track of two MACD indicators can also use the default 12- to 26-day combination. Litecoin\u2019s (LTC) journey from about $75 to $413.49 generated five buy and sell signals. All the trades generated good entry (marked as ellipses) and exit (marked with arrows) signals. <\/p>\n<p><strong><em>Related:\u00a03 ways traders use moving averages to read market momentum<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_the_MACD_can_signal_corrections\"><\/span>How the MACD can signal corrections<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Traders can also use the MACD to buy pullbacks. During corrections in an uptrend, the MACD drops to the signal line but as the price resumes its uptrend the MACD rebounds off the signal line. This formation, which looks similar to a hook, can give a good entry opportunity.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/df4de303-f345-4c42-bbaa-b5e783c54d49.png\"><figcaption style=\"text-align: center;\"><em>ADA\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/ADAUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>In the example above, Cardano (ADA) crossed over the centerline on Jan. 8, 2020, signaling a buy. However, as the up-move stalled, the MACD dropped close to the signal line on Jan. 26, 2020 but did not break below it. As the price recovered, the MACD broke away from the signal line and resumed its move higher. <\/p>\n<p>This gave an opportunity to traders who may have missed buying the cross above the centerline. The sell signal was generated on Feb. 16 just as the ADA\/USDT pair was starting a deep correction. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"MACD_divergences_can_also_signal_a_trend_change\"><\/span>MACD divergences can also signal a trend change<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/4157514f-eb85-4370-b79d-98af7fd8c6eb.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Bitcoin\u2019s price continued to make higher highs between Feb. 21, 2021, and April 14 but the MACD indicator made lower highs during the period, forming a bearish divergence. This was a sign that the momentum was weakening. <\/p>\n<p>Traders should become cautious when a bearish divergence forms and avoid taking long trades during such a period. The long bearish divergence in this case culminated with a massive fall.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-06\/ef07010c-800d-4695-847d-7a38f3c341ae.png\"><figcaption style=\"text-align: center;\"><em>LTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/LTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Litecoin shows how the MACD formed a bullish divergence during a strong downtrend from July to December 2019. Traders who bought the crossover above the centerline may have been whipsawed in September and again in November. <\/p>\n<p>This shows that traders should wait for the price action to show signs of changing its trend before acting on the MACD divergences. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_few_important_takeaways\"><\/span>A few important takeaways<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The MACD indicator captures the trend and also can be used to gauge an asset&#8217;s momentum. Depending on the market conditions and the asset being analyzed,\u00a0 traders may vary the period setting of the MACD. If a coin is a fast mover, a more sensitive MACD could be used. With slow movers, the default setting or a less sensitive MACD may be used. Traders can also use a combination of a less sensitive and more sensitive MACD indicator for better results.<\/p>\n<p>However, there is no perfect indicator that works all the time. Even with the above permutations and combinations, trades will move opposite to expectations. <\/p>\n<p>Traders should deploy money management principles to cut losses quickly and protect the paper gains when the trade moves as per the assumption.<\/p>\n<p class=\"post-content__disclaimer\">The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.\n<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/here-s-5-ways-investors-can-use-the-macd-indicator-to-make-better-trades\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Here\u2019s 5 ways investors can use the MACD indicator to make better trades &#8221; The Moving Average Convergence Divergence, also called the MACD, is a trend-following momentum indicator used widely by traders. Although the MACD is a lagging indicator, it can be very useful in identifying possible trend changes. BTC\/USDT daily chart. Source: TradingView&#8230;<\/p>\n","protected":false},"author":1,"featured_media":271650,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDYvNjQyZmQ2ZDAtYTQ1Yy00Yjg2LTgzZjctOTZlMTIwNGY3ZGNmLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74862,74863,79248,10574,73785,71407],"class_list":["post-271649","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-bitcoin","tag-cryptocurrencies","tag-trading101","tag-education","tag-markets","tag-trading"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/271649","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=271649"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/271649\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/271650"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=271649"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=271649"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=271649"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}