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In this article I hope to educate you on how I use the MACD and what it is used for.
If you have not seen my first post which summarizes all the indicators I use to track my crypto assets check that out with this link. I am also looking forward to posting in depth posts about the other main indicators I use mentioned in that post soon.
I know a lot of people love to HODL but here I teach swing trading which will generally have you hold a position from a few weeks to a few months and try and save you from huge downtrends in the market.
What The MACD?
The MACD is short for Moving Average Convergence Divergence. It measures the distance between two different moving averages. Usually it is then averaged over again and plotted as a histogram. This indicator's purpose is to tell us that our asset is entering an upswing or a downswing and can tell us whether it is safe to buy into a position.
Here is a price chart of Ether with the MACD located at the bottom of this chart. The black line is the 12 26 MACD, the red line is the 9 day EMA of the black line, and the histogram is the plotted distance between these lines that we call the 12 26 9 MACD histogram.
How is it calculated?
Feel free to skip this part if you do not care about the math behind it but I believe its always important to know the math behind what we use.
In this specific case we will calculate the 12 26 MACD. This means that it uses the difference between the 26 day and 12 day Exponential moving average. For example the having a value of 110 and the having a value of . This means the MACD value is since 110-100 = 10. NOTE: this is not the value of the 12 26 9 MACD histogram. To get the value of the histogram we need the exponential average of the MACD over the past 9 days. Say the 9 day EMA of the MACD was , so the value of the MACD histogram would be 10-8 = . In this case with a positive histogram we are seeing an upswing in the price of our asset.
Get these charts for yourself
These charts I show on this blog are generated for free from stockcharts.com. These charts are fully customizable and have way more than just Bitcoin and Ether. To see the full list of cryptos that this site includes then see this link. If you want the exact chart that I use for Ether then feel free to use this link . I am not sponsored by this site, it's just a decent free technical analysis site and if you find a better one to use then all the stuff I teach is still valid there.
Entry and Exit Points (how we use it)
My most used entry point is when the MACD histogram crosses from negative to positive.
You can see that late July there was a perfect setup where the MACD histogram switches from negative to positive. You can see just after that setup ETH went on a massive uptrend that made a 50% return. Then in mid August the MACD histogram goes negative saying that the upswing was over. The most recent upswing is the one starting at the end of September which shows a great time to get into ETH.
My most used exit point is when the MACD histogram crosses from positive to negative. You see in mid August and around September 6 that the MACD histogram crossed from positive to negative. These are times you want to get out of your holdings because theres no saying how long they will fall for.
Essentially, when using only the MACD, get in when the histogram is crossing positive, and get out when the histogram crosses negative. It is never safe to hold during a downtrend.
I'm glad you stuck around to get to the bottom here and I hope you learned something about how to use the MACD. Since this is an in depth post about the MACD if you have any questions please comment on this post and I'll do my best to answer.
I also use Bollinger Bands, Moving Averages, and Stochastics to help me time my trades but to put them all on this post would be too much. I will be putting out in depth posts about how to use those soon so please stick around so you do not miss them.
*for possible legal reasons I will say that this is not financial advice and is to be seen as educational only*
