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21 June 2021

Here’s 5 ways investors can use the MACD indicator to make better trades

Here’s 5 ways investors can use the MACD indicator to make better trades


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The Moving Average Convergence Divergence, also called the MACD, is a trend-following momentum indicator used widely by traders.

Appel highlights how two MACD indicators can be used during strong trends, with the more sensitive one being used for entries and the less sensitive one being used for exits?

The default value used for the MACD indicator by most charting software is the 12- to 26-day combination.

However, for the subsequent examples, let’s use one MACD with the 19- to 39-day combination which is less sensitive and will be used for generating sell signals.

The second one will be more sensitive, using the 6- to 19-day MACD combination which will be used for buy signals.

In October, as the BTC/USDT pair started an uptrend, the MACD gave a buy signal when the indicator crossed above the centerline in mid-October of 2020.

After entering the trade, watch how the MACD came close to the signal line on four occasions (marked as ellipses on the chart) on the sensitive 6- to 19-day MACD combination.

However, the sensitive MACD quickly turned down and dipped below the signal line on July 6, as the BNB/USDT pair entered a minor correction.

Comparatively, the less sensitive MACD remained above the signal line until Aug.

Traders who find it difficult to keep track of two MACD indicators can also use the default 12- to 26-day combination.

During corrections in an uptrend, the MACD drops to the signal line but as the price resumes its uptrend the MACD rebounds off the signal line.

The MACD indicator captures the trend and also can be used to gauge an asset's momentum.

With slow movers, the default setting or a less sensitive MACD may be used.

Traders can also use a combination of a less sensitive and more sensitive MACD indicator for better results.

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