In the world of technical analysis, the MACD indicator is one of the most widely used because it allows analyzing the behavior of the price of an asset by analyzing the convergence and divergence of the price of that value. This offers cryptocurrency traders the opportunity to know the best time to make purchases or sales of such assets.
El MACD indicator o Moving Average Convergence Divergence, by its English name, is one of the indicators market technicians Most used by cryptocurrency traders. This is a trade indicator that is used to analyze the trend of a market. It is based on mathematical analyzes that point us to changes in the financial market. That is to say, the MACD indicator studies the divergence and convergence of the moving average of the value of an asset in a market.
Convergence is the moment when two lines are getting closer to each other. While the divergence is the moment in which they move away. Therefore, this indicator shows us the difference between two moving averages of the price. The results are shown through graphs that can be interpreted in a very simple way. Analyzing these results in conjunction with other indicators, real opportunities for buying and selling assets are offered.
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How does the MACD indicator work?
El MACD indicator, is a delayed indicator which gives us the best of technical trend indicators and oscillators. The former recognize the trend of an asset pair. While the seconds help predict one's movements. This indicator is made up of three components: the line MACD, signal line and histogram.
La MACD line and signal line They are used as oscillators and are interpreted as buy and sell signals. The horizontal axis represents time. When a crossover occurs between lines, there are two possible interpretations.
First of all, if the MACD line crosses the axis from below and exceeds the value of the signal line, it is interpreted as a buy indicator. When the opposite occurs, it is interpreted as a sell signal. If, on the contrary, an approximation to the crossing takes place, it provides information of a possible change but with less force than when a crossing between lines occurs.
the use of a histogram allows us to read the indicator MACD in a more detailed way. This is thanks to the fact that it indicates the difference between the two lines and shows us information about supply and demand. At that time, we can see which of them is more relevant.
El MACD it is configured by default with parameters of 26-12-9 although other popular configurations exist. The parameters are known as exponential moving averages, or EMAs. The settings represent 26 days, 12 days, and 9 days.
Indicator utility
El indicator MACD offers us a very interesting tool with which to detect possible changes in asset prices. This tool can be part of a trading strategy as it provides timely information on the bullish or bearish trend of an asset. Additionally, you can report on the strength of these turnaround signals.
All the MACD indicator signals they are easy to interpret. If, for example, the histogram goes from a negative value to a positive one, it is indicating a buy signal in the market. If, on the contrary, it goes from a positive value to a negative one, it indicates a sell signal.
This divergence and convergence indicator it can make it easier to anticipate and react to bullish or bearish sentiment swings.
En markets with high volatility, Like cryptocurrencies, the use of this tool can confuse the trader. The high volatility of these markets significantly increases false MACD signals. Like any other indicator, the MACD is not infallible. Its interpretation is recommended combined with other technical tools as well as fundamental analysis.
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