The power of the MACD indicator in long term timeframes.
Without a doubt, The indicator MACD (or ''Moving Average Convergence Divergence'', as you please) has become one of my preferred indicators when looking at trading setups.
You don't need to touch anything from the 'default' setup. It's a plug'n-go indicator.
''But Empo, indicators always lag regarding price.''
Yes, that's true. And this is where you take risks (everyone would do this if it was reliable and 100% safe, remember that trading is always a probabilities game).
The thing with that indicator is that you have a few components that can help you to predict a change in the trend.
MACD Histogram: the Ultimate tool.
In my humble opinion, the histogram is the BEST tool of this indicator without a doubt. I could explain, but I prefer to show you.
Let's check this long-term bitcoin chart (remember, indicators always work better in long term timeframes):
This is the weekly chart for Bitcoin from late 2017/early2018 until today. I marked all the crossovers in the MACD indicator.
If you pay attention, you would see that the crossover NOT ALWAYS represent a 100% reliable buy/sell signal, but if you pay attention to the histogram, you can extract a very reliable signal. And most importantly. EARLY.
To define what this 'histogram' represents, Imagine it as a thermometer of the buys/sells currently happening.
If the histogram trends to the medium point ('0') from the positive zone, that means that there's more selling than buying (or that the buys are losing strength, as it feels better for you).
On the other hand, if the histogram is in the negative zone and it starts gravitating to the medium point, that means that sellers are losing their power.
The typical 'guru' says: ''buy/sell on crossovers.''
Your preferred internet anime avatar (me) says: ''check first the histogram.''
Let's check a few scenarios and I'll comment on them what we can see OBJECTIVELY.
2017/2018 Top:
According to the pic, IF (and that's a great 'IF') you would have started taking profits with the histogram, you would have enjoyed higher price points for your sells.
See how the histogram starts down-trending like 3 weeks before the actual crossover? This is where you should start to take profits.
Spoiler: I was greedy and noob and didn't sell anything. I bought NEO at 130$ thinking I was buying 'the dip' AHAHA yeah sure, poor me. Next.
November 2018 dip into 3K$/BTC:
Pretty impossible to predict that move. Nobody expected price to drop from 6K$ after 3 months of laterality.
Not much to comment or to trade here unless you're a scalper. The most correct approach strategy here is 'DCA and pray'. It paid out big time after, but hell, everyone was scared here.
2019 Summer 12K$ Top:
This one played out almost perfectly. You can see the histogram topping and giving you plenty of time to sell before the crossover. Selling into the crossover wasn't a bad move either.
This example is perfect for what I'm trying to show with this post. How all the tools of the MACD can help you to detect changes in the long term trend early.
My latest trade; AVA/USD:
With the BTC charts used 1-week timeframes. With that one (AVA/USD) I'm using a 3-day timeframe (3D). See how the price moved violently after the crossover.
If you started accumulating when the histogram was going down (as I did and told you in previous posts) you did it great.
In addition, we can see another thing very interesting to see. 'High timeframes confluence'.
This is when lower timeframes action scales into higher timeframes, creating monstrous trends over time (have you ever heard about the golden crossovers? If not, that's content for another day).
We saw the 1-3D charts, have you seen the weekly histogram?
Yes, if the bull keeps going strong, there's another bullish crossover incoming.
Let's see how things unfold for AVA. But I've been always very bullish regarding this project.
Eyes on ORN/USD:
And now that I'm here writing and motivated, let's show what I'm seeing with ORN.
Compared with AVA, ORN doesn't have much price history (has been released in July), but the end of the year feels interesting if they deliver their product.
Plus, we 'might' be finding support at the moment.
Shy still, but IMHO accumulation is going on. What do you think?
Well, enough for today.
Didn't tell you before, but I guess that MACD is my favourite indicator for TA. Do you have any favourite tool? Show me in the comments.
Congrats @trumpman, @resiliencia, @queengaga & @acesontop for your earnings. Thanks for trusting me. I'm happy to see that my charting helped you so far.
Happy Trading!
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