Today, I will speak honestly, every word is true! I have been trading cryptocurrencies for 10 years; in the first 3 years, I continuously lost, reducing my initial capital of 300 to 30,000! It was truly painful! My wife and family did not support or understand me! Later, I resigned and invested all my thoughts into it! Every day was spent exploring and summarizing! Now I can finally stabilize my compounding, and my account has earned back over 40 million!
In addition to solid techniques, I will first share the 9 super trading rules I summarized, hoping to inspire beginners in the cryptocurrency circle and help them avoid detours! Grow by standing on the shoulders of giants! If you learn it well, you can achieve a doubling of your investments!
1. Avoid revenge trading.
When a trade is closed, whether in profit or loss, it is essential to steadfastly adhere to the rules. After executing a stop loss, try not to check it again within 24 hours. This can effectively avoid revenge trading, as opening a trade out of revenge can likely exacerbate losses. Some believe that one should rise from where they fell, but it is more important to remain calm and observe until new entry conditions are triggered. Since traders often spend several hours a day looking at charts, it becomes difficult to resist the temptation to open a trade again after a stop loss.
2. Try not to participate in trading over the weekend.
Every weekend, the volatility of cryptocurrency prices increases, and the trading volume is very low. This makes it difficult to predict short-term price trends. The reason is simple: weekend buy and sell orders are usually small, market liquidity is low, and large whales can more easily manipulate short-term prices, which makes the disadvantages of retail traders even more apparent. Additionally, since the cryptocurrency market operates 24/7, the trading intensity is much higher than that of the stock market, and weekends are a good time for relaxation and rest; after all, life is greater than trading.
3. Maintain trading at specific times.
As mentioned earlier, the cryptocurrency market operates 24/7 without pause, and even full-time traders cannot keep watching the market continuously. To maintain a clear mind, one can set fixed trading hours. After opening a position during trading hours, set stop-losses and take profits, and then you can engage in other activities. This eliminates the impulse to constantly check your phone or analyze K lines, allowing trading to occur without affecting normal life.
4. Do not develop feelings for a particular asset.
If you fall in love with the asset you are trading, it can easily lead to poor decision-making. Excellent traders profit from efficiency and rules, giving themselves an advantage because most market participants are driven by emotion. 'Being an emotionless trading machine' can ensure decisiveness and principle in trading. Many traders suffer heavy losses because they easily become emotionally attached to specific altcoins, teams, or projects. This can be acceptable for medium to long-term investors, but it poses a potential disaster for short-term traders.
5. Maintain simple trading rules.
Traders often combine multiple indicators, news, and K line patterns to try to find suitable trading convergence points. This in itself is not a problem, but be careful to avoid over-analysis, which complicates issues. In fact, when a K line pattern suitable for one's system appears on the chart, trading can be initiated. At the same time, pay attention to setting stop-losses and position control, which is particularly important.
6. Only trade with the correct mindset.
When you feel angry, tired, or stressed about something, do not trade; your mindset will affect your judgment. The key to maintaining a good mindset is to have other daily activities outside of trading. For example, fitness, reading, and spending time with family and friends can help cultivate the correct trading philosophy.
7. Keep a trading diary.
Reviewing trading diaries can be tedious, but it is actually very meaningful because it can help you avoid making the same mistakes. Both profitable and losing trades have specific reasons behind them, and recording trading details is a way to learn, allowing you to grow quickly.
8. Do not try to catch falling knives.
'Catching falling knives' refers to traders attempting to bottom fish for assets in a sharp decline. The motivation for bottom fishing is usually to lower the cost price to make up for losses caused by a significant drop. Attempting to accurately bottom fish during a sharp decline is unwise. It is more prudent to wait for stabilization and rebound, and then enter once resistance levels are converted into support levels.
9. Do not ignore extreme market conditions.
While referencing technical analysis indicators, one must not ignore black swan events or other extreme market conditions. Ultimately, the market is driven by supply and demand, and sometimes the market is extremely unbalanced.
Trading is a long-term practice. If you want to make a living from trading, you must follow the rules and build your own trading system!
So how to do well in trading cryptocurrencies? Once a person enters the financial market, it is difficult to turn back. If you are currently losing and still confused, but plan to treat trading cryptocurrencies as a second career in the future, you must know the 'simplest MACD trading strategy.' Understanding it thoroughly will help you avoid many detours, as these are personal experiences and feelings. It is recommended to collect and ponder repeatedly!
The MACD indicator is one of the most classic technical indicators among all technical indicators. By correctly using this indicator, in combination with K lines (daily, weekly), individual stock trends, volume, market trends, and negative or positive news, one can achieve better buying and selling results. Below, I will share the most comprehensive uses of the MACD indicator, which only the proficient can truly understand, and I will share it just this once!
The general judgment criteria for the MACD indicator mainly revolve around the conditions and forms of the two moving averages (DIF and DEA lines) as well as the red and green histogram (MACD bars). The general analysis methods mainly include analyzing four major aspects: the positions of DIF and DEA, the cross situations of DIF and DEA, the contraction of red bars, and the shapes of MACD charts.
1. MACD is the most commonly used indicator by experts.
The role of the MACD indicator in technical analysis is extremely special and can be said to be an indispensable part of learning technical analysis. Its importance can be summarized in the following points:
The MACD indicator is one of the most effective technical indicators tested by historical trends and is also the most widely used indicator.
The MACD indicator evolved from the EMA indicator and has a good application effect for grasping trending markets. Trend investors typically reference this indicator in practice.
The top and bottom divergence of the MACD indicator is widely recognized as one of the best methods for 'bottom fishing and peak escaping.' This method is an important tool for concretizing trend theory and wave theory.
Many veterans have had this experience: they start learning the MACD indicator when they first enter the field, only to gradually discard it. After a long period of learning and comparison, especially after practical verification, they eventually return to the MACD indicator. This illustrates the uniqueness of this indicator.
The application of the MACD indicator in quantitative trading is also extremely widespread.
It is precisely because of these advantages that the MACD indicator has become the most commonly used technical indicator by professional traders.
Two, the concept and calculation of the MACD indicator.
The MACD indicator, also known as the Exponential Moving Average Convergence Divergence (MACD), was created by Gerald Appel to track price trends and assess the timing for K line buy and sell decisions. This indicator is commonly used in market software and is known as the 'king of indicators.' As shown in [Figure 1].
In the cryptocurrency circle, the MACD indicator consists of the fast line DIF, slow line DEA, MACD histogram, and the zero axis, referred to as the 'three lines and one axis.' Investors analyze prices through the intersections, divergences, breakthroughs, supports, and resistances of these 'three lines and one axis.' The MACD indicator can become
Many market software rank it as a preferred indicator, indicating its widespread application, which also indirectly shows that this indicator is one of the most effective and practical indicators tested by history.
Three, the golden cross and dead cross of MACD
The 'golden cross' and 'dead cross' patterns are extremely important in technical indicator analysis.
The golden cross pattern can also be called a golden cross, which refers to when an indicator line of a relatively short period crosses upwards and intersects with a longer-period indicator line (of the same type), often indicating a short-term buying opportunity. If the golden cross pattern appears at
①. After a short-term rapid downward trend during a downward move;
②. After a wave of pullback during the upward movement;
③. After the consolidation trend during the upward movement,
when the golden cross pattern appears at a phase's low point, it is a more reliable buy signal.
A dead cross pattern can also be called a death cross, which refers to when an indicator line of a relatively short period crosses downwards and intersects with a longer-period indicator line (of the same type), often indicating a short-term selling opportunity. If the dead cross pattern appears at
①. After the consolidation trend during the downward movement;
②. After a wave of rebound during the upward movement;
③. After a short-term rapid upward trend during an upward move,
When the dead cross pattern appears at a phase's high point, it is a more reliable sell signal.
After understanding the golden cross and dead cross patterns, we can take a closer look at the golden cross and dead cross patterns of the MACD indicator line. Golden crosses and dead crosses appearing at different positions reflect different market meanings.
Situation one: Buy point of the low-level golden cross. If the position of the golden cross of the DIFF line and DEA line appears below the zero axis and is far from the zero axis, this golden cross is called a low-level golden cross. Investors can view this golden cross as merely a short-term price rebound, and whether the K line can form a true reversal still needs to be observed and confirmed in conjunction with other indicators.
As shown in the figure above: On August 27, 2019, in the 10-minute K line chart of BTC, a low-level golden cross occurred with the price's pullback, and then it rebounded by $200. Short-term investors can seize the opportunity to enter.
Situation two: Buy point of the golden cross near the zero axis.
If an upward trend has formed, and the golden cross of the DIFF line and DEA line occurs near the zero axis, then it is often an excellent buying opportunity for investors.
This is because, after the upward trend forms, a golden cross near the zero axis indicates that the adjustment has completely ended, and a new round of upward momentum has begun. If it is also accompanied by the golden cross of the average volume line, it shows that the price's rise is supported by trading volume, making the buy signal even more reliable. Once this buying point appears, investors should absolutely not miss it; otherwise, they will miss a significant upward trend.
As shown in the figure above: On August 19, 2019, at 09:30, in the 5-minute K line chart of BTC, Bitcoin broke above the 30-day moving average, indicating that an upward trend has begun to form. For a period thereafter, the price almost always operated above the 30-day moving average. At 14:00 on August 19, 2019, the MACD indicator formed a golden cross near the zero axis, indicating that the market is about to experience a significant upward trend. Investors can buy decisively.
Situation three: Buy point of the high-level golden cross.
If the golden cross of the DIFF line and DEA line occurs above the zero axis and is positioned far from the zero axis, then this golden cross is referred to as a high-level golden cross. High-level golden crosses generally appear when
During the consolidation trend of the K line's upward process, it indicates that the consolidation has ended, and the K line is about to continue the previous upward trend. Therefore, when a high-level golden cross occurs, it is a good signal for increasing positions. In practice, when an upward trend forms, and the K line rises slowly and continues for a long time, once the MACD indicator forms a high-level golden cross, it is often a precursor to the K line accelerating upward. Because of this, the high-level golden cross can also be used for swing trading. Investors can use the MACD indicator to continuously target upward swings during an upward trend.
As shown in the figure above: On June 25, 2019, in the 3-hour K line chart of BTC, the price of Bitcoin, after a period of consolidation, rose again in an upward trend, while the MACD indicator showed a high-level golden cross. This indicates that the adjustment has ended, and the price will resume the previous upward trend. Investors should grasp this opportunity to increase positions.
Situation four: Sell point of the low-level dead cross.
A low-level dead cross refers to a dead cross that occurs far below the zero axis. This type of low-level dead cross often appears at the end of an upward rebound during a downward trend, thus signaling the end of the rebound. At this point, investors who are not in the market should observe, while those who are deeply trapped can sell first and buy back after the price falls to reduce costs.
As shown in the figure above: On July 14, 2019, in the 3-hour K line chart of LTC, the MACD indicator of Litecoin showed a low-level golden cross, and the price experienced a slight rebound, followed by a rapid decline. Subsequently, the MACD indicator formed a dead cross below the zero axis, and the K line began a new round of downward movement. Spot investors can sell at the dead cross position and then repurchase to reduce holding costs.
Situation five: Sell point of the dead cross near the zero axis. If the previous market direction has been a downward trend, then the cross formed by the DIFF line breaking below the DEA line near the zero axis is referred to as the dead cross near the zero axis, indicating that the market has accumulated considerable downward momentum near the zero axis. When the dead cross occurs, it signals that the market's downward momentum begins to release, and the K line will continue its original downward trend, signaling a sell.
As shown in the figure above: On August 12, 2019, in the 1-hour K line chart of BTC, the DIFF line of Bitcoin broke below the DEA line near the zero axis, forming a dead cross. This indicates that downward momentum in the market is beginning to release and serves as a sell signal. Investors should sell decisively; otherwise, they will be deeply trapped.
Situation six: Sell point of the high-level dead cross.
When the DIFF line breaks below the DEA line at a distance above the zero axis, it is referred to as a high-level dead cross. This type of dead cross is sometimes accompanied by a top divergence of MACD. This manifests as: during a sustained upward trend, the price continues to set new highs, but the MACD indicator's DIF line and DEA line no longer continue to rise or sustain the upward trend, instead diverging from the price trend and gradually moving downward.
Above the zero axis, when the DIF line crosses below the DEA line to form a downward cross, it constitutes a death cross, which is a relatively reliable sell signal.
As shown in the figure above: On August 23, 2019, in the 1-hour K line chart of TRX, after a preceding upward segment, the price continued to set new highs, but the DIF line and DEA line no longer continued to rise, then forming a death cross, signaling a sell.
Four, the divergence of MACD and K lines
Divergence is a term used in physics to describe momentum; in technical analysis, it is a widely used analysis method with a high success rate. In a downward trend, when the price sets a new low while the indicator line does not, it is called bottom divergence, indicating that upward momentum is accumulating.
This is a buy signal. In an upward trend, when the price sets a new high, but the indicator line does not, it is called top divergence, indicating that downward momentum is accumulating, signaling a sell.
Ⅰ. Bottom divergence.
The bottom divergence of the MACD bars and DIFF line.
The bottom divergence of the DIFF line and price refers to when the price sets a new low in a downward trend, but the DIFF line does not set a new low. It indicates that during the price's downward process, the decline of the DIFF line is less than the decline of the price, and upward momentum in the market is continuously accumulating, making it likely for the price to stop falling and have a significant upward probability in the coming period.
The MACD bars are the MACD histogram hidden behind the DIFF line, divided into red and green. Its divergence from price is an important application of the MACD indicator, widely used in practice. The bottom divergence of the MACD bars and price refers to when the price consistently sets new lows while the MACD bars do not follow suit. This indicates that upward momentum is accumulating in the market, and the price is likely to stop dropping, making it probable for an upward move in the near term.
When the bottom divergence appears, investors can grasp specific buying points in two ways.
Specific buying timing.
The bottom divergence of the DIFF line, MACD bars, and price is not a specific point in time but a pattern that appears over a period of time. However, the specific buying point for investors is a specific point in time, indicating that the price is about to stop falling. Therefore, to grasp the specific buying timing, when the DIFF line, MACD bars, and K line appear in bottom divergence, investors must combine the bottom divergence with other technical analysis tools to specify the buying point.
First: Bars changing color or the golden cross of MACD.
When the bars change color, it indicates that market upward momentum has begun to dominate. It generally appears after the 'bar shortening,' and although it may be late, it is more reliable. When the bottom divergence occurs and the bars successfully change color or form a golden cross, investors can buy.
As shown in the figure above: On August 26, 2019, in the 15-minute K line chart of Ethereum (ETH), the price of Ethereum set a new low while MACD bars did not set a new low, forming a bottom divergence shape between the bars and price. This indicates that market upward momentum is beginning to accumulate, and there is a high possibility of a subsequent price rise. Soon after, the color of the bars changed, and these two sequential buy signals combined increased the reliability of the upward significance, allowing investors to enter when the bars changed color.
Second: Combine with other technical analysis tools and K line reversal patterns. The combination of bottom divergence and K line reversal patterns, such as 'single needle bottoming' or 'three soldiers at the bottom,' is a concrete application of the principle of 'multi-indicator combination.'
As shown in the figure above: On August 26, 2016, in the 30-minute K line chart of BTC, the price of Bitcoin set a new low, but the MACD bars did not set a new low, forming a bottom divergence between the bars and price, indicating that market upward momentum is continuously enhancing. Accompanied by the price's drop and stabilization, it forms a buy signal of 'MACD bars and price bottom divergence + K line single needle bottoming.' Subsequently, the price experienced a wave of upward movement.
Ⅱ. Top divergence.
The top divergence of the MACD histogram and the DIFF line
The top divergence of the MACD histogram and K line refers to when the price sets a new high in an upward trend, but the MACD histogram does not set a new high. It indicates that downward momentum is accumulating in the market, and the price may drop at any time.
The top divergence of the DIFF line and K line refers to when the price sets a new high in an upward trend, but the DIFF line does not set a new high. It indicates that downward momentum is continuously accumulating in the market, and there is a high probability that the price will experience a downward trend next. The specific timing for selling is similar to the bottom divergence; in practice, according to the principle of multi-indicator combination, investors can use the following methods to make the sell signal more specific.
First: Bars changing color or the dead cross of MACD.
After the top divergence between the MACD bars and the K line forms, if the bars suddenly shorten significantly, it indicates that market downward momentum is beginning to release. Investors should pay attention to sell in a timely manner. The change in color of the MACD bars indicates that market downward momentum has already dominated, and it generally appears after the bars continue to shrink. If the bars and K line show top divergence followed by a color change in the bars or a MACD dead cross, investors should pay attention to exit in a timely manner.
As shown in the figure above: On August 9, 2019, in the 1-hour K line chart of HT, the price of Huobi set a new high, but the MACD bars did not set a new high, forming a top divergence shape between the bars and price. This indicates that downward momentum in the market is beginning to accumulate, and the price may show a downward trend at any time. Subsequently, the MACD bars changed from red to green, issuing a sell signal of 'bars and price top divergence + bars changing color.' Investors should pay attention to exit in a timely manner.
Second: Combine with other technical analysis tools and K line reversal patterns. After the MACD bars and price top divergence appears, if other technical analysis tools also simultaneously show sell signals, then the reliability of the market sell signal will greatly increase. At this time, investors should pay attention to exit decisively. Commonly seen in such sell signals are 'bars and price top divergence + K line reversal patterns,' etc.
As shown in the figure above: On July 20, 2019, in the 3-hour K line chart of ETH, the price of Ethereum set a new high, but the MACD bars did not set a new high, forming a top divergence shape between the bars and price. This indicates that downward momentum in the market is continuously increasing, and the price may show a downward trend. Subsequently, the MACD bars gradually shortened, while the K line formed a bearish Evening Star pattern. Investors should pay attention to exit in a timely manner, and afterwards, the K line showed a significant downward trend.
Five, modification of MACD parameters.
The lagging response to price changes makes buy and sell levels sometimes less than ideal, which is a flaw of the MACD indicator. One way to change this situation is to adjust the indicator parameters to make the MACD indicator respond more sensitively to trends, thereby allowing buy and sell points to be more ideal. In common market software, the default parameters for the MACD indicator are 12/26/9. Under such parameter settings, the MACD indicator often shows significant lag in response to price changes. The lag of the MACD indicator can be addressed by adjusting the parameters. Commonly used parameter combinations include 5/34/5, 5/10/30, etc. Investors can also try and explore more in practice.
Evening Star: In the process of rising, a long bullish candlestick appears first, followed by a short real body candlestick (either bullish or bearish) the next day, which is metaphorically compared to a star, being the main part of the candlestick pattern. The third candlestick is a long bearish candlestick, which has deeply penetrated the real body of the first candlestick. The Evening Star is a signal indicating a peak and reversal in price, with some predicting an accuracy rate of over 80%.
Finally, those who have been through the rain often want to hold an umbrella for others. Having experienced days of isolation and helplessness, they can empathize with others' losses. They want to lend a helping hand, hoping to compensate for the regret of wanting to be pulled up at that time, as if they were crossing time and space to hold an umbrella for their past selves who were caught in the rain.
Xiao Xun only does live trading, the team still has positions to get in quickly.