This is because the three key techniques are often easily overlooked by people. For example, the first technique is how to set parameters, which involves revisiting old matters from the 1970s. We all know that the default parameters for MACD are 12, 26, and 9, but these parameters come from the 1970s in the US stock market, where they traded six days a week and 26 trading days a month. Therefore, the default parameters for MACD suggest that 12 represents two weeks, 26 represents a month, and 9 represents a week and a half. According to this rule, we should actually set the MACD parameters to 14, 30, and 10.5 before using it, because in the cryptocurrency market, there are seven trading days a week. Although in practice, the difference is not too significant, this technique has already touched on the knowledge blind spots of most people.
But the more critical techniques are the last two, which are not only simple but also suitable for verification in combination with other indicators. The important second technique is to look at the 0 axis. We know that the MACD indicator mainly includes the DIF and DEA lines, which are commonly known as the fast and slow lines. When the fast line crosses above the slow line, it is the so-called golden cross, while when the fast line crosses below the slow line, it is the so-called death cross. There are also the red and green bars and the 0 axis, which are three important elements. Among them, the 0 axis is the most easily overlooked. In practice, we can simply refer to the area above the 0 axis as above water. When both the fast and slow lines are running above the 0 axis, it indicates strong bullish strength, while the area below the 0 axis is called below water. When both lines are running below the 0 axis, it indicates strong bearish strength. Therefore, when we use MACD, the first step is to check whether the two lines are running above or below water to determine which side is stronger before participating. With this premise, we can then look at the golden and death crosses and have three key phrases.
First, do not participate in the underwater golden cross for now, because the underwater golden cross can only be a temporary signal of a stop in decline and stabilization. It's hard to say that a trend will reverse; it may more likely be a trap set by the main force to lure in buyers. If you encounter this temporarily, do not participate.
Second, the golden cross above water is much more reliable than the death cross below water, like here--
The golden cross appears above water, which is also the starting point of the cycle for the coin price.
However, the death cross appearing below water here is followed by an accelerated decline.
Third: the essence, the death cross above water must consider the coin price. When a death cross appears above water, looking only at MACD is relatively ambiguous. However, it has a more niche application, which is to combine with the support of the coin price. For example, at this position, there was a death cross above water--
We can find the K-line corresponding to this death cross, locate its lowest price, and draw a horizontal line. If the price adjustment following this does not break below this line, then we can continue to hold. At this time, do not be afraid; this is just a consolidation. However, if it breaks below this line, it indicates a break of support, and in the short term, it will be bearish.
The third technique is one that everyone is more familiar with: looking for divergence. There are also two phrases: after a top divergence, look for bearish signals. What is divergence? Divergence means, for example, in this case--
, during a rising trend, the coin price reached a new high, but the MACD fast and slow lines did not simultaneously reach a new high, and the red bars below were also shrinking. This situation where MACD and the coin price are not synchronized is called divergence. Divergence occurring at a high level is often followed by bearish sentiments, while divergence at a low level is followed by bullish sentiments. This is easy to understand: when the coin price is in a downtrend and reaches a new low, but the MACD fast and slow lines do not reach a new low and the red bars are continuously shrinking, then this pattern is a typical bottom divergence. The appearance of this signal indicates that the coin price will experience a bottom reversal. If you can master the three techniques I talked about today, you will have gradually formed your own trading system.
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