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Hello Everyone,

We are in season 2 week 6. One more interesting cryptocurrency topic from professor @kouba01. It's my pleasure to do homework for @kouba01.

What is the MACD indicator simply? Is the MACD Indicator Good for Trading Cryptocurrencies? Which is better, MACD or RSI?

MACD (Moving Average Convergence Divergence) is one of the best tools for doing technical analysis to understand the market trends and price analysis.
It helps traders to measure the strength, direction of market trend, and entry and exit point of reverse strategy.

There are three base components:

• The MACD line
• Signal line
• Histogram

Let’s understand by an example

MACD line: 12-periods (EMA)exponential moving average – 26-period exponential moving average based on mathematical calculation. In the above screenshot, the blue line is the MACD line. That shows a market up or downtrend.

The dark orange is the signal line that is an average of 9 periods EMA of the MACD line.

Whereas green and red color graphical representation are Histogram which is calculated MACD line – Signal Line. It oscillates above and below zero. Let’s say if the MACD line is q and Signal line is r then the equation will be like this

q-r=P (where P is Histogram)

MACD line indicator is very popular for technical analysis for trading by using MACD line trader can ensure that wining rate. Whether need to buy or sell.

As in the previous class, a professor shared the details about the Relative Strength Index (RSI). What I believe the RSI is better than MCAD why because in RSI trader can take a call even before market correct and get more profit on the investment. Whereas MACD is based on a combination of indicators so it might get overlap and support by another parameter.

How to add the MACD indicator to the chart, what are its settings, and ways to benefit from them? (Screenshot required)

To get the real experience I’m using the Binance Exchange platform for representation.

Once we landed at the Binance trading platform first select trade type as classic then the screen appears as

Next click on TradingView and the indicator icon that is marked in the red box.

Then search from MACD in the input box.

Siganal line color can be modifid as

Selected MACD graph

FastLength: By default value is 12 of longitude that represents EMA, It’s customizable.

SlowLength: The slowest EMA length is 26 default.

Source: Source input indicators represent the type price like Open, close, high, or low.

SignalLength: Basically, it’s shows the length of signal line.

When the space between MACD line and Signal line getting wider and that is histogram getting start slope up when space between MACD line and signal line get tiny where histogram start slope down. A move into the market structure (support and trendlines). MACD histogram shows the strong momentum And for technical analysis the MACD default value is (12,26,9).

How to use MACD with crossing MACD line and signal line? And How to use the MACD with the crossing of the zero line?

Let’s see crossing the MACD line by the bullish and bearish trend.

Bullish trend:

In the below screenshot we see the blue line (MACD line) crossed at -287 to the signal line from bottom to top with strong momentum in the bullish trend zone.

Bearish Trend:

In the above image, we can see the MACD line cross at -169 to the signal line from top to bottom in the bearish trend zone. With high resistance.

Crossing of the zero line

By using the MACD zero line indicator, a trader can check the MACD line and forecast the market like if the MACD line crosses the zero lines from below upwards that means the market is going to a bullish zone and take benefit of that if crosses the zero lines above downwards that indicates the market is going into bearish trade zone. So, traders can save themselves from loss and wait for the market goes upwards.

How to detect a trend using the MACD? And how to filter out false signals? (Screenshot required)

In general, people confused with zero lines from below upwards and cross zero lines above downwards. when the MACD line and signal line difference gets wider that means its convergence and bar size will be bigger while the difference between the MACD line and signal line get tiny then mean it divergences and bar size will be smaller.
And using the moving average line in the below screen I’ve taken 12 periods EMA and 26 EMA and map both the graph MACD line and histogram. If both the line shows the same MA in uptrends that means it’s a correct buy signal.
Here RIS indicator will best compare indicators to matching the right signal for buying and selling.

How can the MACD indicator be used to extract points or support and resistance levels on the chart? Use an example to explain the strategy. (Screenshot required)

When we do technical analysis then support and resistance are very important factors. Where support shows when the market trends follow upwards and it gives the signal for buy therefore resistance shows downward market trends and gives a sell signal. But there are issues to hold the crypto. And some case histogram gives a false signal to avoid that support and resistance help trader to make the right decision. Let see an example of BNBUSDT

In the above screen, we can see how higher resistance shows the market trend and the MACD line histogram also show the same. And it’s going zero lines above downwards. So it’s good to signal for sale.

Review the chart of any pair and present the various signals from the MACD. (Screenshot required)

As we can see the MACD line (blue color) cross the signal line (dark orange color) with strong movement in an uptrend that is a good signal for buy BNB and the histogram shows a bigger bar and difference between MACD line signal line space wider.

In this screen, the MACD line crosses the line above downward and it shows a bearish market trend for the sell signal.

Conclusion

The MACD indicator is one of the best tools for assuring the winning rate for traders. It would more effective with the RSI indicator. So I have learned a lot from the lecture and thanks to professor @kouba01 for this great lecture.

Thanks,
@sanjeev.kumar