Traders use rapid rises or falls in the MACD line as a signal the stock is overbought or oversold. When stocks are overbought or oversold, it is generally accepted volume traded will return to ‘normal’ levels. The signal line (sometimes called the MACD signal line) is the 9-period EMA of the MACD line.

MACD Crossovers

Or, put another way, it’s a reading of an average of the last 9 values of the MACD line. This results in the signal line being a slightly slower, more smoothed out version of the MACD line. For short-term trading, the 15-minute and 1-hour charts provide excellent opportunities for day trading setups.

Despite decreasing, downside momentum is still outpacing upside momentum as long as the MACD remains in negative territory. Slowing downside momentum can sometimes foreshadow a trend reversal or a sizable rally. Centerline crossovers can last a few days or a few months, depending on the strength of the trend. The MACD will remain positive as long as there is a sustained uptrend.

Crypto Fear and Greed Index

Although this approach can deliver profitable results in many cases, the MACD’s signal can often fail. This can happen, for instance, when the MACD line and signal line cross over one another multiple times. If you took an entry every time they crossed, you could quickly lose numerous trades in a row. This is why so many traders prefer to combine the MACD with another form of market analysis.

Falling dominance points to a risk-on environment, with capital moving into altcoins, especially Ethereum. By following these steps, traders can harness the best indicators for crypto trading while keeping their strategies disciplined and focused. To get the most out of the best indicators for crypto trading, using them strategically and in combination is key. Each tool gives you a different angle on the market, and pulling those insights together helps confirm what you see and avoids unnecessary guessing.

• It has been prepared without taking your objectives, financial situation and needs into account.
• During strong trends, RSI can remain overbought or oversold for long periods, showing sustained momentum.
• In ranging markets, MACD divergence signals are prone to false breakouts.

Building Your Personalized MACD Trading System

Tracking BitDegree’s Crypto Fear and Greed Index daily can give you a quick read on the market’s mood, helping you make smarter moves instead of reacting to every swing. The Simple Moving Average calculates the arithmetic average of an asset’s price over a specified number of periods, typically using closing prices. That said, MACD is still one of the most favored tools by many traders. As the downtrend begins and the fast line diverges away from the slow line, the histogram gets bigger, which is a good indication of a strong trend. This is because the difference between the lines at the time of the cross is 0.

Conversely, low volume with a bearish crossover could indicate a weak sell signal. However, it’s crucial to combine MACD with fundamental analysis, ensuring that a stock is not just gaining momentum but also has strong financials and growth potential. The MACD is a customisable indicator primarily usedto recognise momentum shifts, identify trend and trend reversal signals, and distinguishbetween overbought and oversold markets. It can also be employed across a rangeof asset classes and is utilised by short-term scalpers and day traders, aswell as longer-term swing traders and positiontraders. The next chart shows Google (GOOG) with a bullish divergence in October-November 2008. First, notice that we are using closing prices to identify the divergence.

At the same time, try to interact with the market actively, take advantage of trading opportunities, and minimize risks. Creating a medium-term news trading strategy for cryptos is impossible. Unlike in Forex, there’s no economic calendar for the crypto market. So, we don’t have reporting publication dates, statements, or central bank decisions.

Range trading

The crossover strategy is one of the most common MACD trading strategies, and it can be used by beginner traders easily, as well. Profitable entry points are always identified at the crossover, highlighted as vertical green lines in the picture below. However, when trading with the MACD indicator, you must be aware of the false signals as well, highlighted in red. The best way to avoid any false signals is to wait for a price movement to occur before you take any decision, but not keep waiting for too long.

• If you look at our original chart, you can see that, as the two moving averages (MACD Line and Signal Line) separate, the histogram gets bigger.
• Finally, the trade closes all the same, but the loss is much bigger.
• This is called regular positive divergence, when the indicatorleads priceaction.
• It effectively identifies both trend direction and momentum, offering a comprehensive view.

The MACD’s moving averages are based on closing prices and we should consider closing prices in the security as well. Second, notice that there were clear reaction lows (troughs) as both Google and its MACD how to send eos to myetherwallet line bounced in October and late November. Third, notice that the MACD formed a higher low as Google formed a lower low in November. The MACD turned up with a bullish divergence and a signal line crossover in early December. ATR, Bollinger Bands, and the Ichimoku Cloud are among the best indicators for crypto in volatile markets. ATR gauges volatility for stop-loss placement, Bollinger Bands highlight overbought or oversold zones, and the Ichimoku Cloud outlines support, resistance, and momentum.

A 2019 research study (revised 2020) called “Day Trading for a Living? ” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). ” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and crypto options and futures exchange for bitcoin ethereum solana and more 2006. Once you understand the parameters used to calculate MACD, you can adjust them to fit your trading strategy.

Bullish Vs. Bearish Crossovers: Identifying Potential Entries

It won’t predict what price will do next — and it’s not meant to. The indicator plots this around a horizontal line at zero, often called the baseline. The first thing most traders look for with the MACD are “Crossovers”. Copyright © 2025 FactSet Research Systems Inc.© 2025 TradingView, design your own coin purse with photo Inc.