An Introduction to MACD Crypto Trading Strategies
Moving Average Convergence Divergence, MACD for short, is a technical indicator that can be used to assess an asset’s momentum and determine market trajectory, enabling you to better identify emerging opportunities.
How Does MACD Work?
MACD crypto trading strategies use a histogram to plot the difference between an MACD line and a Signal line, made up of exponential moving averages (EMAs). Let’s start by defining all this terminology.
The MACD line is the 12-day period EMA minus the 26-day period EMA, and the Signal line is the 9-day period EMA, which is applied to the resulting value.
It is the convergence and the divergence between these lines that are displayed in the histogram and can be used to identify trend momentum. A trend that is gaining momentum will see the EMA’s diverge, and they will converge when the trend is slowing down.
A histogram represents the distance between the MACD line and the Signal line
You get your buy and sell signals based on whether the signal line, or 9-day period EMA, is crossing over or under the MACD line. If the MACD is trading above zero, you have a bull trend, and if it is trading below zero then this will confirm a bear trend.
Among the most popular MACD crypto trading strategies are Histogram Reversals, Crossovers, and Zero Crosses, and in this guide, we will take a brief look at each of them.
The Histogram Reversals Strategy
When there is a great deal of market momentum the histogram will grow in height and will shrink if the market is losing steam.
As the bars that reflect the difference between the MACD and Signal lines move further from zero, the moving average lines will have greater distance between them. Following this expansion, a hump will signal a shift as the moving average lines narrow, indicating that a crossover is coming.
One of the primary advantages of Histogram Reversals is that this is a leading strategy, so rather than just reflecting historic price action, it uses recognized trends as a basis for anticipating future price activity, enabling you to get a jump on the market and execute your strategy before the price moves.
You should follow the trend trajectory and hold out until the histogram has displayed two separate countertrend moves to be absolutely certain you are not just seeing a blip but an actual reversal.
The Crossover Strategy
A crossover strategy looks at the connection points between the MACD line and the Signal line to get buy and sell signals. The buy signal is identified when the shorter-term MACD line crosses above the less dynamic Signal line, whereas the sell signal is confirmed when it crosses below.
This is a lagging strategy, that is based on price activity that has already occurred and so a trade can only ever be opened only after the market has moved. This can be problematic, since when market trends are relatively weak, the price may already be reversing by the time the signal has been generated.
The Zero Cross Strategy
If the MACD line crosses zero from above in a downward trajectory, a bear trend is coming, whereas if it crosses zero from below trending upward, this will indicate an impending bull run. It is therefore a good idea to open a long position, as soon as the MACD passes above the zero line.
The slow pace of the Zero Cross strategy means you will see less signals, which in the highly volatile crypto markets can mean that, as with the Crossover strategy, you can get your signal too late to be of use. However, if you are planning to execute longer-term market moves this strategy can be very valuable as there is a lower risk of false reversals.
A Simpler Option
MACD is a popular indicator but like any other form of crypto technical analysis it requires a certain time commitment, grasp of the market and tolerance for the high risks that come from the unpredictability of the incredibly volatile crypto market.
However, there is another way to invest in digital currencies, which enables you to radically reduce your risk. With crypto arbitrage, you can continue to earn a steady profit, even if crypto prices experience a sudden unexpected change in trajectory. Here’s how it works:
Crypto arbitrage generates a profit exploiting brief instances in which a coin is be available at different prices, on multiple exchanges, simultaneously. These price inefficiencies can occur for all kinds of reasons but are often the result of a disparity in trading volume and liquidity levels between exchanges of different sizes.
Here, at ArbiSmart, our fully automated crypto arbitrage platform is integrated with 35 exchanges, which it scans 24/7 for price differences on all types of digital assets. It then automatically buys the asset on the exchange where the price is lowest before instantly selling it for a profit, wherever the price is highest.
All you need to do is register, fund your ArbiSmart account and the platform takes over. It converts your deposit into RBIS, the platform’s native token and uses it to trade crypto arbitrage.
Since temporary price inefficiencies across exchanges will continue to occur, even in a crypto crash, your capital maintains its value. You have a great hedge against falling prices and will earn profits that start at 10.8% a year (0.9% a month) and reach as high as 45% a year (3.75% a month), depending on the size of your deposit.
On top of annual yields of up to 45% from crypto arbitrage, you will earn compound interest, as well as addition profits of up to 1% a day if you choose to store your funds in a locked savings accounts for a pre-determined period. Then of course, you also earn capital gains on the rising value of the RBIS token which has already gone up in value by over 520% in just two years.
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