Understanding the MACD Indicator and How to Apply It to Crypto Trading (Part 1)

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As a crypto or forex trader, moving average convergence divergence (MACD) is a very important indicator that is used to measure the relationship between Exponential Moving Averages (EMA).

According to a popular crypto information site,

_{Moving average convergence or divergence (MACD, or MAC-D) is a trend-following momentum indicator that shows the relationship between two exponential moving averages (EMAs) of a security’s price. The MACD line is calculated by subtracting the 26-period EMA from the 12-period EMA. Source}

MACD simply stands for Moving Average Convergence Divergence, which is displayed on a chart of any traded asset. To this end, whenever you apply MACD to a trading chart, you will see three types of lines: the blue line, the red line, and the green line, which all have their own functions.

To this end, the blue MACD is the line that signals a potential buy. (i.e., a buy signal), which is usually seen crossing above that of the MACD Red Line, which is a potential sell signal, whereas the green is a histogram that helps you to know the difference between the signal line and the MACD line, which is the relationship of the exponential moving average (EMA), which is normally 12 period and 26 period.

How to Apply MACD on a Crypto Chart

Applying the MACD indicator to a crypto chart is very easy, just as we learned how to apply the RSI in our previous lesson. In this case, let's take a look at how we can apply MACD on Trading View. Note: You need to have an account with Trading view (demo).

• Launch your Trading View and click on "Indicator."

• On the search bar, type in MACD.

• After you have searched and seen the indicator, tap on it, and instantly you will see the indicator.

What you should know about MACD

After you have successfully applied the indicator to your chart, below are the key things you should know about trading with the indicator.

• Whenever you see that the MACD line has crossed above the zero line, you should know that it is an uptrend signal.

• Whenever you see that the MACD line has crossed below zero, you should know that it is a downtrend signal.

• As a trader, you can use the one that crosses above the signal line to buy, whereas the one that crosses below the signal line is to sell.

• The formula for calculating the MACD line is calculated as follows: 26 period EMA minus 12 period EMA. In addition to this, the 9-period EMA is the signal line.

Screenshots Gotten From Tradingview

Lesson on RSI Part1, Lesson on RSI Part2

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