The best Technical Analysis Indicator - All about MACD

There are several essential configurations in this indicator that will allow us to execute buy and sell operations in the market. So, to know these configurations and to know what benefits we will be able to obtain, pay close attention:

• Crosses of the MACD line with the SIGNAL line

This is if you will, is the main configuration that we can use with the MACD. Its operation is very simple, we only have to wait for a crossing between these two lines to be able to execute a purchase or a sale in the market. In this sense, if we are looking for a "Buy" operation, we must wait that, in the lower pole of the graph, the MACD line crosses from bottom to top the signal line, this will indicate that a new uptrend can start, we must also be very aware that the MACD line (Blue), is above the signal line (Red), for this entry to be valid.

Screenshots of Tradingview

---

• Crossing of the MACD lines and the Signal line, with the ZERO line

Another of the configurations that we will be able to use, is the famous crossing of the lines of the MACD and signal, with the average line (ZERO) that our indicator has. Its operation is very simple, we only have to wait until after these execute their usual crossing, commented in the previous part, these must simultaneously cross the ZERO line, giving us another signal of entry to the market in the direction that we are working. We must take into account something, this signal is more delayed than the others, but we can interpret it as, the movement we are seeing has more strength.

Screenshots of Tradingview

---

• The Histogram and its benefits

The histogram is another tool that we can use to our benefit. Its operation is very simple and can provide us with one of the best signals that, in my opinion, this indicator has, since it basically comes before all the others. The histogram shows us green and red bars, depending on the direction that the price has at that moment, these represent the strength of the movement, then, while a movement is becoming stronger, it means that the bars grow in size and the opposite happens if the movement weakens, since the bars tend to decrease in size. When we can identify that a movement is weakening, this can give us a clear signal of reversal, because it is warning us that the price may be turning around, which can allow us to enter before it happens, something that happens before the conventional crossing of the MACD and signal lines.

Screenshots of Tradingview

---

• Trading with the MACD divergences

The last configuration that we can use with the MACD, is that, we can identify the famous divergences. It may often be difficult to find such signals, but if we sharpen our eyes on the chart, we can realize the details that does not leave the price and then, we can enter a trade having the odds in our favor. In this sense, in order to identify a divergence, we only have to look at our chart, if, for example, the asset we are analyzing has an uptrend and is making higher and higher highs and we look at the time our MACD and see that our MACD lines and signal, are making lower and lower lows, this means that the uptrend is weakening, so the best chance is that the price is reversed and this may be the signal for us to invest in the opposite direction and take advantage of this movement.

Bullish and bearish MACD divergence - Screenshots of Tradingview

Using the MACD in these two configurations is very simple and easy to understand, even for me that I am still in the process of learning in this profession called "Trading". To understand how we can enter trades in buy or sell with these forms pay close attention:

MACD Crossing with the Signal line.

• To enter Buy: To be able to enter purchases with this configuration, we only have to wait for a new trend to form in our asset. To be able to identify this, we must only be attentive to the lower end of the MACD, since, at this point we must wait for a crossing of the MACD line (BLUE), with the SIGNAL line (RED) from bottom to top, when this happens the MACD line must be above the Signal line, confirming that a new uptrend has formed and, therefore, we enter bullish.

• To enter Sales: To enter sales with this setup we should expect absolutely the opposite of the previous point. In this sense, we will look for "Sell" when the MACD lines (BLUE), crosses the SIGNAL line (RED) from top to bottom, when this happens the MACD line must be below the signal line, ratifying that a new downtrend has formed and, therefore, we enter to the downside.

MACD and SIGNAL line crossing with the ZERO line.

• To enter BUY: To enter buys based on this setup, we only need to keep an eye on the MACD and signal lines. Generally, these lines cross according to what I explained above giving a reversal signal, however, if in a certain way we could not buy at that point, but we want to take advantage of the complete movement and not lose it, we wait for the MACD line and the signal line to cross simultaneously from bottom to top, this will give us another signal that the trend still has strength to continue and join the upward.

• To enter Sales: To enter sales based on this setup, we must do the opposite of the previous point. As I said, we must also be aware of the MACD and SIGNAL lines, since these lines cross as explained above, then we have that the MACD and SIGNAL lines come from the upper end and if we do not take advantage of entering this crossing, we must only wait for the downtrend to take more strength and both lines simultaneously cross the ZERO line, this will be another signal to invest downward just when this happens.

Detecting trends with this indicator, is another of the many utilities that I have already discussed above. Although I will be very specific at this point, since my research led me to the fact that there are only a few ways to do it and take advantage of it so that we can benefit from it. In this sense, trends can be formed in many temporalities and we can always see that these are different depending on the temporality we are working with. Based on this, I will detail how to do it:

• Crossing of lines: The famous crossing of the lines that I have already commented in the past, is a way to detect the new trends that the price is forming, in the different temporalities that we work.

• The lines above the ZERO line: Another way to detect an ongoing trend and not since its inception, is to observe when the MACD lines and the SIGNAL line are above the ZERO line and also manage to stay for a certain time above it. This means that the trend is maintained and is strong.

Screenshots of Tradingview

To filter the false signals, I have my own ideology or if you can say, strategy, of how to do it, since, in itself the indicator does not have a tool that allows us to filter the signals that we should not take and those that very possibly would go against a well-defined trend. So to identify these false signals we must take into account the following:

• Use moving averages or another oscillator that allows you to identify trends: The moving averages can allow us in any temporality, to filter a trend, if we are not quite sure of the strongest direction that the price has. For example, we can use a "SMA" of 350 periods, and determine on which side the price is, if it is below the moving average, the trend is bearish if on the contrary it is above it is bullish. In this sense, in either of the two scenarios, we will only take the MACD signals that are in the direction of the dominant trend.

• The higher the time frame the more reliable: Another technique that can be very useful, but that is only made for traders who have patience, is to use higher time frames, these time frames will allow us to easily observe the general direction of the price and we should only take MACD signals that are in the direction of the general trend.

False signals filtering with moving averages - Screenshots of Tradingview

---

False signals filtering with higher temporalities - Screenshots of Tradingview

Using the MACD, in order to identify support or resistance, is very useful and simple and we just have to take into account certain aspects, to be able to refine our view and determine these points on the chart. To do this we must only follow the recommendations that I will describe below:

• To observe carefully where the MACD and SIGNAL lines, make a reversal and then return to touch the same point, preventing the lines to move in one direction or another. To be clearer, is to observe the path of these lines and determine at which points it turns around, once this is done, we go to our chart and the price should be being held back by an area, which the price (Japanese Candlesticks), has not been able to cross. This approach must be simultaneous, both in the chart and in the MACD indicator, with this we will realize if it is a valid support or resistance to take into account.

Valid supports - Screenshots of Tradingview

---

Valid resistances - Screenshots of Tradingview

In this last question, you can observe, how all MACD signals are presented in the same currency, for this example I use the cryptocurrency called Binance Coin (BNB).

The MACD is really a flexible indicator and very easy to use, it really has a number of benefits for our operations, besides adapting to all types of investors. I hope this information related to one of the most incredible indicators that I have tested, is to your liking, my intention, as I have already said, is to bring real financial content that helps all new users to understand the entire ecosystem related to finance and of course, with cryptocurrencies.