Those who are familiar with me know that I never play with empty theories; I only talk about practical insights.
Today I want to talk to everyone about a seemingly simple yet extremely practical technical indicator—MACD. As a senior analyst in the cryptocurrency market, I have seen too many people talk theory brilliantly, yet their trading is a complete mess. The problem often does not lie in the theory itself, but in whether one can translate the theory into an executable trading system.
In a highly volatile market like cryptocurrency, not having a clear trading system is like driving without a steering wheel. Below, I will combine my years of practical experience to share how to use MACD to build a complete trading framework.
01 Why do traders need to pay attention to the MACD indicator?
MACD is one of my most commonly used tools for trend judgment. It consists of three parts: the DIF line (fast line), the DEA line (slow line), and the histogram. The biggest advantage of this indicator is that it can simultaneously judge the direction of the trend and the strength of momentum.
Many beginners make a mistake - they rashly enter based only on the golden cross and death cross signals. But in actual trading, I always emphasize that the zero line of the MACD is the dividing line between bullish and bearish. When the MACD is above the zero line, the market is dominated by bulls; when below the zero line, bears are dominant.
For example, last week's Bitcoin trend, the 4-hour MACD consistently operated above the zero line, and even when a brief death cross occurred, it was just a normal pullback in the bullish trend. In this case, my strategy is to only consider buying on dips and give up the opportunity to short against the trend.
02 Practical Skills for MACD Multi-Period Analysis
The cryptocurrency market operates 24/7 without interruption, and MACD for different time periods conveys signals of different levels. The cycle combination I often use is 4 hours - 1 hour - 15 minutes, which forms a fourfold relationship and can effectively filter out false signals.
Taking Ethereum as an example, if the 4-hour MACD golden crosses above the zero line, this indicates a positive trend at the daily level. I will look for signs of the end of a pullback on the 1-hour chart, and then pinpoint the specific entry point on the 15-minute chart.
The biggest advantage of this multi-period analysis method is that it can avoid being shaken out by short-term fluctuations. Many beginners only look at the 5-minute or 15-minute charts, making them susceptible to market noise and unable to hold positions. By combining larger and smaller cycles, one can grasp the overall direction while accurately locating entry points.
03 Identifying and Responding to MACD Divergence Signals
Divergence is one of the most powerful functions of MACD, capable of predicting trend reversals in advance. When the price hits a new high while the MACD fails to reach a new high, a top divergence forms; conversely, when the price hits a new low while the MACD fails to reach a new low, a bottom divergence forms.
Last week I successfully captured the rebound of Litecoin through the bottom divergence signal: Litecoin's price hit a new low, but the 4-hour MACD indicator gradually rose, forming a clear bottom divergence. I decisively entered when the MACD golden cross appeared on the 1-hour chart, capturing an 8% rebound shortly afterward.
However, it should be noted that divergence signals must wait for the MACD golden cross or death cross for confirmation. In the cryptocurrency market, multiple divergences often occur, so do not enter with a large position based solely on divergence.
04 Verifying MACD Signals with Volume-Price Relationship
In the cryptocurrency market, the volume-price relationship is key to verifying the effectiveness of MACD signals. I always adhere to the 'Effort vs. Result Principle': trading volume represents effort, and price movement represents results. When trading volume and price movement are synchronized, the trend will continue; when they are not, a reversal may occur.
For example, when the MACD shows a golden cross signal, if it is accompanied by a significant increase in trading volume and a sharp rise in price, this is a high-quality buying signal. Conversely, if the MACD shows a golden cross but the trading volume shrinks and the price fluctuates slightly, the reliability of this signal is lower.
The stages of accumulation and distribution by the market makers are clearly reflected in the relationship between volume and price. For example, during the distribution phase, prices often fluctuate at high levels, and the MACD may show a bearish divergence, while trading volume gradually shrinks. Recognizing these signals can help us take profits and exit in a timely manner.
05 Trading Mindset and Risk Management
No matter how good the technical indicators are, without a good mindset and risk management, it is difficult to sustain profits. The principle of 'trading new stocks, not old ones' is a practical rule in a bull market, but it needs to be combined with technical analysis to grasp the timing.
My personal risk control rule is: the loss from a single trade should not exceed 2% of the total capital, and at no time should excessive leverage be used. In the cryptocurrency market, staying alive is more important than making money - only by staying in the market can one seize real opportunities.
Many people have a lot of theories but trade poorly, often due to a lack of discipline. I will prepare a trading plan in advance, including entry points, stop-loss points, and target levels, and then strictly execute it. The market will never be short of opportunities; what it lacks is patience and discipline.
As an analyst who has been navigating the cryptocurrency market for many years, I know that no indicator can predict the market with 100% accuracy. The MACD is a powerful tool, but the ultimate success depends on how we use it.
A true trading expert is not someone who understands many complex theories, but someone who can consistently execute simple and effective methods. In the highly volatile cryptocurrency market, a clear trading system, strict risk management, and a stable mindset are more important than any technical indicator.
I hope my sharing can help everyone build their own trading system. Remember, there are always opportunities in the market, but the premise is that you need to stay in the market.
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