B2B #3 MACD

[aritra]

B2B #3 (Back to Basics episode 3) : MACD

MACD is a popular indicator to identify and confirm the trend. It is best to see the MACD of price chart before entering short/long position.

MACD or Moving Average Convergence Divergence has 3 components:

1. MACD line : it is calculated as (12 days EMA - 26 days EMA)
2. Signal line : it is calculated as 9 days EMA
3. histogram of difference between 2 lines. Since Signal line and MACD line will go over and under several time, the histogram will have both positive and negative bars, oscillating with the zero line.

See my earlier post for EMA calculation: https://steemit.com/trading/@aritra/b2b-2-back-to-basics-episode-2-moving-average

Here is how we can make out the trend from the MACD:

1. If the MACD line is above the signal line -> trend is bullish
2. if the MACD line is below the signal line -> trend is bearish
3. if the MACD line is above the zero line -> trend is bullish
4. if the MACD line is below the zero line -> trend is bearish

Let's see the BTC/USD chart with MACD indicator to understand it better.

As you can see, each bull and bear run can be confirmed by any of the above Indicators.

Please see your preferred chart for analyzing the trend.

Comments

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