Have you ever surfed?
One way to understand market trends is to see them as waves. They are varied, different, of different lengths, and each one with a particular strength and duration depending on the weather conditions and the location.
Traders who know how to surf them are the ones most likely to amass profitable results over the long term. Building a capacity for adaptability and resilience that consolidates our investments.
What is MACD?
We present to you MACD (Moving Average Convergence Divergence), a technical indicator that we use to measure the strength of a trend and predict its possible change of direction.
It is one of the most popular and used indicators by traders both beginners and experienced.
How does it work?
MACD is based on the comparison of two exponential moving averages (EMA), one of 12 periods and another of 26 periods. The difference between these two moving averages is called the MACD Line.
In addition to the MACD Line, MACD also shows us two signal lines, one of 9 periods and another of 9 periods. These signal lines are used to confirm the signals of the MACD Line.
How can you interpret it?
The signals of the MACD can be read in several ways. One of the most common ways is to use the crosses of the MACD Line and the signal lines.
When the MACD Line crosses above the signal lines, it is considered a buy signal. On the other end, when the MACD Line crosses below the signal lines, it is considered a sell signal.
Isn't it simple?
Another method is based on taking advantage of divergences.
Divergences occur when the MACD Line and the price of an asset move in opposite directions.
An upward divergence occurs when the price of an asset reaches a new high, but the MACD Line does not. This could mean that the uptrend is losing strength.
On the contrary, in a downward divergence, the price of an asset is located at a new low, but the MACD Line does not follow this pattern.
In this case, it may be that the downtrend is decreasing.
5 Tips to Get the Most Out of It
If you are not experienced, start with a short time frame: For example, 12 periods for the 12-period EMA and 26 periods for the 26-period EMA. As you gain experience, you can increase the time frame.
Wait for the signals to be confirmed before making a trade: This applies to all markets, but especially if we are talking about the cryptocurrency market as the volatility is quite high.
Do not use MACD as an isolated tool: It works at its maximum potential with other indicators and analysis.
Study the behavior of the market: The more you understand how the market moves (especially understanding movements of major companies that have a major impact on the assets you are interested in), the better you will be able to interpret the signals.
Share your results and broaden your perspective: Your community can help you a lot to nourish your judgment and even your data and teach you new ways to approach your projections. Join now and interact with traders from all over the world.
MACD is a powerful tool that can help you to make more informed trading decisions. By following the tips in this article, you can get the most out of this indicator and increase your chances of success in the market.
We hope this information helps you to take advantage of this tool.
Remember that we are just a click away to help you achieve those numbers for which we work daily.
Much success this week, trader!
REFERENCES
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interpreted and provided by AI (Google Bard). Written and edited
by Kevin David Terán and verified by Pedro Arizaleta and Erwin Sánchez
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