Crypto Academy Season 2 Week 6 Homework Post for @kouba01 - Cryptocurrency Trading with MACD indicator by @sadiaanyat

In this lecture, the MACD indicators are explain in detail by @kouba01. This is most commonly used indicator by the investors. This indicator help us to identify the entry and exit spot. Sometime it emit false signal too. For best result, this indicator is used with other indicators such as RSI. I am going to write my this week homework after reading the lecture.

What is the MACD indicator

MACD is the abbreviation of Moving Average Convergence Divergence. It is an indicator which is used oftenly in crypto world. This indicator is used when the trader do the technical analysis to predict the future market trend. This indicator is use to discover the future market trend. This indicator help the investor to predict that what will be the market price, when to enter in the market and when to exit. The MACD indicator is obtained by a simple calculation. The twenty six day moving average of the asset's price is substracted from the twelve day moving average of price of coin. Two color line are there on the chart. One is blue and other is orange.

• Orange line is the signal line.
• Blue line is MACD line




Is the MACD Indicator Good for Trading Cryptocurrencies?

MACD is a trend following indicator. All the expert investors do the analysis before investing. The future of the market is predicted by using different strategies and indicators. MACD use to find out the the direction of the market trend. This indicator is very oftenly used indicator which helps you to discover the potential market entry and exit spot.

Which is better, MACD or RSI?


Multiple indicators are used by the investors to find out the market trend. MACD and RSI are also most common indicators. To find out what is best among these two, we need to know what actually are the differences and features of them.

MACD	RSI
This indicator follow the direction of market trend. After that, it start to show the signal to the investors.	Change in the market trend direction is shown after overbought or oversold. After Overbought or Oversold, the signal of change in the market direction is shown.
MACD is an indicator which help to calculate what is the connection between any two Exponential Moving Average.	It calculate How much transition is there in the price of any asset/coin as comparison to the latest rise and fall of coin price.
Popular among investors to analyze the market trend	It also a popular among investors to analyze the market trend


Both these indicators work in different way. We cannot say which one is better because there are the chance of failiour in both indicators. These are not perfect. So to get better result, we should use these two indicators together. It will help us to analyze the market in best way.

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

It is very easy to add the MACD indicator. There is a need to follow a few steps to add the MACD indicator. Let's start.

First select the currency whose analysis you want to do. I select the ETH/USDT.

Open the trading view of the chart.

Click on the "fx indicator" button.

Type the "MACD" on the search bar.

Select the first link.

MACD Settings

Once you have added the MACD in chart, it is easy to change the setting according to your own.

• Click on the "setting icon" shown there.

• Usually the default slow length of the MACD chart is 26. The fast length is 12. And the signal smoothing is 9. You can change these according to your own. Some experiences set the values to get the most accurate indicator.

• There is another option "style". If you want to chnage the color, you can by clicking over there.

The MACD indicator is actually the combination of MACD line, Signal line, Histogram and Zero line.

Signal line

Signal indicator play the role of leading indicator. The signal line is the nine day exponential moving average of MACD line. This moving average is very fast. The investors get rapidly about the market trend by the signal line. The reversal market signal is emitted when (above or below by)MACD line and signal line intersect each other.

MACD line

MACD line is the combination of two exponential moving average. In other word, to get the MACD line, the short term moving average is minus by long term moving average. To obtain the MACD line, the following formula is used.
12EMA _ 26EMA = MACD line

Histogram

Histogram is the difference between MACD line and balance line. The bar chart is observed by the investors to determine the market trend. It is either the up to the zero line or the below to the zero line. The above side shows the market uptrend and lower side indicate for market down trend.
MACD line _ Signal line = Histogram

Zero Line

Going along with the zero line mostly emitted the error signal. As i mentioned above that histogram is ether above or below to the zero line so zero line is the mid point of Histogram.

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

There are two ways that MACD line cross the signal line. I am going to use the chart to show How MACD is used with crossing MACD line and signal line

i) The MACD line crosses the signal line upwards:

When the MACD line cross the Signal line upward, the trader get the signal that market is going to uptrend. It is the signal for traders to buy the coins. The color of histogram is green in this case.

ii) MACD line crosses the signal line downward

When the MACD line crosses the signal line downward, it emit the signal to sell the coin. The selling period start for the traders. The histogram is showed downward with red color. It is the market downtrend.

iii) The MACD line crosses the zero line upwards:

When the MACD line crosses the zero line upward, the same as the the above case(i) it shows the buy signal to the traders. In this situation the investor but the coins.

iv) The MACD line crosses the zero line downwards:

When the MACD line crosses the zero line downward, the same as the the above case(ii) it shows the sell signal to the traders. In this situation the investor sell their invested assets.

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

The MACD indicator is most commonly used indicator by the investor. The investors use this indicator to determine the market trend. The momentum of market is determined by the investors after seeing the direction of the market shown on the MACD chart. Basically its all about the signal line and the MACD line. When MACD line goes up to signal line, it mean the market uptrend. When MACD line goes down to the signal line, it indicate the market down trend. When MACD line and signal line intersect, it mean that the trend(uptrend or downtrend) is finished now.

In the above graph, it can seen that when the MACD line intersect with the Signal line, a new trend is start over there. When the MACD line go up from the signal line after intersecting, the market uptrend is start there. When the MACD line goes downward after intersect, the market down trend start there. The trend get so strong when these two lines are far away from each other. If market is upward you have good opportunity to sell the investment. It will turn into a very high profit. If The trend is downward, it is good time to buy the coin at low price.

And how to filter out false signals?

As the Crypto world is versatile. The investors uses multiple strategies and indicators to predict the future of market. But not these indicators give 100% true result. There is dark side of every thing. Some time these indicator may direct you negatively.

Although the MACD indicator is best and frequently used indicator, but still sometime is leads you toward the wrong. You must know that there is something wrong when tiny candle sticks are shown there in the graph. These small sticks is a signal for you to know that this output is not true.

When you see that the MACD line is going up but price is trending downward, it mean that the wrong signal is produced. If you see that the MACD line is going downward while the price of the coin is rising, it also indicate that the produced signal is false and an errorier.
In the above graph, the tiny candle sticks shown that the false signal is produced here. You can see that the graph line is not match with the MACD line.

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)

Support level: Support level is the point which the investor consider suitable for buying the coin. The price of coin get low and investors buy coin at that point.

Resistance level: Resistance level is the pint which the investors consider suitable to sell the coin to get good profit. The price of coins is high at that point, so investors sell the coin and get reward.

When the MACD line is intersect with the signal line, a trend is close there a a new trend is going to start. At intersection point, a resistance or support level exist.

In the above graph, where i first circle, that point is showing that the signal line intersect the MACD line. A downtrend is start there. It shows the support level. The investors take the support level a good opportunity to buy the coin.

Where i circle for second time, the MACD line intersect the signal line. A market uptrend is start there. The price of market rise. The investors take this situation a good chance to sell their invested assets. The resistance level is there after the second circled intersection. After the third circle, a downtrend start again. Again the investors will sell their investment.

When the MACD level goes up to resistance level at support point, that point is best point to buy the coin. At the resistance levels, The signal line and MACD line intersect and MACD line goes downward. These points are best to sale the purchased assets.

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

The points where i circled as sell, it mean that the MACD line intersect the signal line downward. It mean that the price is starting decreasing. There was a uptrend in market. When the MACD line cross the signal line, the trend changed to the downward. This is a right position for the investor to sell their coins to get the good profit

The points where i marked the Buy, it mean that MACD line intersect the signal line upward. It mean that the price is starting increasing. There was a downtrend in market. When the MACD line cross the signal line, the trend changed to the upward. This is a right position for the investor to buy the coins to get the good profit. They will buy the coins at low price. When market will rise, then they will sell their coins at high price and will earn high reward.

But if the trend still in negative side after intersection, it mean that the market is still down. It is not good time to buy the coin. When the MACD line cross the zero line upward, then this indicate the market uptrend is started. then you can buy the coin.

Although MACD indicator is good, but still the expert investors use the MACD indicator by combining it with others.

Conclusion

The MACD indicator is most commonly used indicator to analyze the market trend. The investors use this indicator to predict the Market price, to discover market potential entry and exit points. This indicator is very useful to determine the next market trend. When the price of coin is rise ,a sell signal is raise there to direct the investors to sale their coins. It would give them a good profit to sell the coins at good high price.

When the price of a coin decease, a buy signal is given to the investors which direct them to buy the coins at low price. It may produce wrong signal sometime, but mostly it direct the investors positively. That's why it is most common and frequently used indicator. It give more accurate result when it use with combination of RSI.

Cc:
@steemitblog
@kouba01