Here’s 5 ways investors can use the MACD indicator to make better trades
June 11, 2021. Summarized by summa-bot.
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Traders use the MACD indicator to identify turning points, facilitate entries on pullbacks and capture the larger part of a move until the trend starts to reverse course.
The Moving Average Convergence Divergence, also called the MACD, is a trend-following momentum indicator used widely by traders.
A signal line, which is the exponential moving average of the MACD completes the indicator.
However, for the subsequent examples, let’s 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.
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.
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 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.
Comparatively, the less sensitive MACD remained above the signal line until Aug. 12, 2020, capturing a larger portion of the trend.
Traders can also use a combination of a less sensitive and more sensitive MACD indicator for better results.