1. Moving Average Convergence Divergence (MACD) is a momentum indicator used by traders to determine if the short-term trend is working in their favor.

  2. MACD crossovers are used to signal to buy and sell opportunities.

A quick introduction

What does it tell us?

For starters, the advantage of taking the difference of a shorter and faster exponential moving average (EMA12 and EMA26 respectively) is that we can easily identify the short-term trend of the market and the intensity of momentum at a specific period. Thus, if the MACD rises it means that recent price data is increasing at a faster rate than prior data points (buying pressure/momentum).

How to use it in a simple strategy

To do that, we need to look for two confirmations or buy signals. Start by interpreting the histogram. Is it above or below 0? If it’s above zero (bullish) how large are the bars? If the bars are increasing it means that bitcoin is being bought up and if the spread continues to become greater, bitcoin may become overbought. On the contrary, if the bars begin to decrease it means that the price is going to retrace back to the average, so it’s best to wait to see what happens once both lines converge.

Simple Strategy