MACD Indicator 101

Mohammed Shakil
Nov 18, 2019 · 3 min read

If you trade in any asset class, it’s highly likely you hear of technical indicators. As indicated by the title, today I will share a few quick basic methods of how to use MACD.

MACD is known as Moving Average Convergence Divergence. It’s calculated using 2 Moving average. One is known as the MACD line and the other as MACD Signal.

They are many ways you can use MACD but to keep this post simple and small we will talk about only 2methods.

Cross Overs:

It’s simple and it works, Most of the time.

MACD Crossovers

Once you plot a MACD on a chart you will start to notice a direct correlation of the price changes with the MACD crossovers. It might not work all the time and that’s normal. The purpose of MACD is to help reduce the noise from the sound.

Histogram reversals

The other key way to spot a trend is to notice when the histogram is reducing and turning positive. I have taken a few good calls spotting the reduction of Histogram as it happens before the crossover at times.

This is a part of the Crossover but the Histogram gives a more early indication and can be used to avoid risky entries.

There is a 3rd method but known as divergence which focuses on spotting patterns when the MACD is acting opposite to the Price. If the price is falling and MACD is rising that a Bullish indication and if the MACD is falling and the price is rising that a Bearish indication. As you can see in the chart below.

Bullish MACD Divergence.

Personally I wouldn’t recommend this for beginners as these are a bit hard to spot and get tricky to assess for a call. The idea was to inform you so that you can backtest and practice it.

MACD is an awesome indicator but that alone is not enough, you will other indicators such as Moving Average and RSI to help improve you’re odd.

Don’t forget to have Stoploss and do proper risk management. It's always best to do your own assessment on any indicators, backtest it till you understand how it works and even then make sure to do proper RISK: REWARD setup and money management.

I wrote a post to explain that in detail for that,

You can check out my post of Moving average Below

And how to use Volume to make better trades

Finally, now that you know what to look for in a crypto’s MACD how do you find the crypto whose MACD crossover has happened or whose Histogram is decreasing?

Check out Tradeplan to know how it can help you make and save money.

Hope this post adds value to your trades. Thanks for reading.

Mohammed Shakil

Written by

@shakks , 2 Minutes reads ! Founder @ , ,

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade