Superorder Basics: MACD and RSI Technical Indicators
Greetings, pro traders and green enthusiasts! In our Superorder Basics series, we unveil the functionality secrets to help you get the maximum of the platform. Today, we want to talk about a brand new feature — conditional orders based on technical indicators.
As for now, our crypto trading terminal supports only two signals: MACD and RSI. You can insert them in the strategy just like other conditionals to execute subsequent action orders just on time. Don’t worry, it’s super easy.
Ah, here’s one thing to learn or remind before we start. Indicators are based on periods. This term refers to the chart’s time, i.e. a 12-period moving average on a daily chart will mean 12 days. Similarly, the same 12-period parameter on an hourly chart will turn into 12 hours. That’s it.
MACD
Structure
MACD is for Moving Average Convergence Divergence. It’s a lagging trend-based indicator that shows historical data and helps to identify the market’s direction and power. Shortly, it delivers simple buy or sell signals. There are three main parts:
- MACD line. The difference between two exponential moving averages. The most traditional setup is 12-period fast EMA and 26-period slow EMA. Still, you can use 5 and 35, respectively, for longer frames.
- MACD signal line. It’s a smooth version of the previous part. Usually, traders take the average for the last 9 periods (days, hours, you know) of MACD line. A variation for slow trading is based on 5 periods.
- MACD histogram. Numerous bars represent the actual difference between the two mentioned lines. The histogram reveals zones where assets are overbought or oversold so it’s also widely used for signals.
Here, we don’t want to dive into the chart study. You can check the architecture and features of MACD indicator in the great guide by Binance Academy.
Signals
Okay, but how to use the indicator? Nothing can be simpler. Again, there are three main types of events to remember:
- MACD line (blue) crosses the zero line. When it happens from bottom to top (MACD line enters the positive zone), it’s a bullish signal. Otherwise, when the indicator enters the negative zone below zero, it means that bears have momentum.
- MACD line (blue) crosses the MACD signal line (red). Similarly, when MACD crosses the signal during an uptrend, it’s a strong buy signal. When it moves down and crosses the signal from top to bottom, it’s a bearish sign.
- Histogram (white) crosses the zero line. Bars located in the positive zone show the power of bullish run so the highest numbers mean the most possible reversal. It works similarly when bars are below the zero line but for bears.
Also, remember that too far distance between three lines (MACD, signal, zero) also may mean that the market is overextended and correction is close.
RSI
Structure
RSI or Relative Strength Index shows the power of current market buy or sell actions. It’s a momentum indicator so it reflects the ongoing situation. There’s a simple formula that divides average gains by average losses over a certain time. The classic number is 14 periods but you can specify a smaller frame like 7 periods for higher sensitivity or raise the limit to 21 or so for more stability.
Similarly to MACD, you can read about RSI in this guide. Feel free to conduct extra research to clearly understand how things work.
Signals
Generally, RSI (yellow line on the chart) is used to detect overbought and oversold zones defined on a relative scale from 0 to 100 points. Let’s look at these areas:
- Overbought. When market buyers are bullish, they invest more and more in a specific asset pushing prices higher. RSI helps in detecting when the trend approaches the limit. Usually, overbought zones start from 70 points (upper grey line on the chart) and enable sell signals. Some traders use levels at 75 and 80 for more guarantees.
- Oversold. Vice versa, when people tend to sell crypto, they push the price down and down. As RSI crosses 30 points (lower grey line on the chart), we enter the oversold zone. Here, you can place first buy orders. Similarly to safer overbought indicators, some investors wait for 25 or 20 but these levels are pretty rare.
Also, you can use the indicator to spot bullish/bearish divergences. When the price moves down and RSI goes up — it’s a bullish signal. When rates are rising but RSI slopes down — it’s a signal of a bearish market.
Using Indicators in Strategies
Finally! We reached the magic moment when Superorder gurus explain how to use these indicators in trading.
Actually, it’s easy. You can put MACD or RSI conditional in any part of your chain to monitor market state. Then, place an action order such as Market Buy or Market Sell right after your indicator. Thus, the terminal will wait for the required conditions and immediately purchase or sell coins upon reaching them.
In the preferences, you can create different patterns. MACD features three variables (main and signal lines plus histogram) as well as modifiable value. Use 0 value to indicate the zero line or paste your custom numbers. RSI is simpler as it features only one scale from 0 to 100 points. Both indicators have a wide selection of conditionals: equal, greater, less, greater or equal, less or equal, crossover bottom to top, and crossover top to bottom.
As for exact combinations, if you’re waiting for buy signals, your condition will look like “MACD histogram crosses 0 bottom to top” or “RSI is less or equal than 30”. For short positions, specify something like “MACD crosses MACD signal top to bottom” or “RSI is greater than 70” to spot the best opening moment. As for now, it’s not possible to combine indicators parallelly but we’re working on this! :)
In conclusion, take a look at parameters you can change in the indicators’ settings:
- Periods: for MACD, there are short (usually, 12), long (usually, 26), and signal (usually, 9). For RSI, you will have only one period (usually, 14).
- Intervals: choose the desired time frame here. For 1d interval, all your periods will be in days; for 1 week — in weeks, and so on.
- Sources: select which part of the candlestick will be the price source. There are four options in both indicators, including Open, High, Low, and Close.
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