$BTC
Concise teaching section, come and see. What counts as a real MACD divergence, applicable to any spot market of altcoins.
First, the core of divergence: 1. It is only a signal of weakening momentum in a period of market movement, all divergence signals are terminated after the MACD fast and slow lines cross the zero axis, entering a new period of market.
2. All divergences must be combined with volume and price behavior; otherwise, many are false divergences.
3. Must work with larger cycles combined with smaller cycles.
Taking BTC on a 2-hour basis as an example.
Why do we see a bottom divergence but the price has not further increased?
After falling from over 97300, the MACD has mostly been running green bars, what does this signal mean? It proves that there have been people bottom fishing all along, but in larger cycles, such as above the daily line, the red bars are running, which indicates that retail investors are constantly bottom fishing while large players are selling, hence the price has not further increased.
The conditions for a true bottom divergence are that, first, the price must drop with the fast and slow lines below the zero axis, creating a new low with the fast and slow lines rising.
Second, the MACD red bars (must have) must first gradually increase, then gradually decrease. After creating a new low, the red bars become shorter relative to the previous low, and there must be significant volume with little price action, meaning there is a huge transaction volume, but the body of the bearish candle is very small.
Only such can be considered a true bottom divergence signal.
The bearish candle in the screenshot of BTC, with volume and price action on a 2-hour basis, does not count as a true bottom divergence, it can only be described as a short-term rebound.
Green bars indicate that bulls have been trying to fight back but are suppressed by larger timeframe bears, so the current weakness in the BTC rebound is due to this.
The principle for top divergence is the same.
Regardless of the type of divergence, as long as there are multiple instances of volume without price action, if it is a top divergence, significant volume with a small bullish candle body, and for bottom divergence, significant volume with a small bearish candle body usually indicates a trend reversal signal.
As of now, the BTC 4-hour chart has closed at a lower closing price, which is a dangerous signal. I have never understood your reasons for going long. If the subsequent daily close is below 93500, will you still go long?
Switching to shorter time frames, 5 minutes or 15 minutes, BTC is repeatedly breaking down and falling back around 95657, which is a sign of weakness, either you wait for BTC to break the bearish trend at 107400 and bottom fish.
