What is Moving Average Convergence Divergence (MACD)

Moving Average Convergence Divergence was defined by Gerald Appel in the 70s. It measures the distance of a short and a long-term moving average to try to identify the trend. A second lagging moving average over the convergence-divergence should provide a “signal” upon being crossed by the MACD. 

MACD Indicator

MACD is a trend-following momentum indicator that displays the relation between two moving averages of the price of a financial asset. MACD triggers technical signals when it crosses above (to buy) or below (to sell) its signal line.

How To Calculate the MACD Indicator

Formula:- macd = ema(data, me1_period) – ema(data, me2_period)

  • signal = ema(macd, signal_period)
  • diff= macd – signa

Why Use Moving Average Convergence Divergence (MACD)

It helps investors understand whether the bullish or bearish movement in the price is strengthening or weakening. MACD triggers technical signals when it crosses above (to buy) or below (to sell) its signal line. 

How to Use Moving Average Convergence Divergence (MACD)

Bullish Scenario:– When MACD crosses over the zero line, it signifies that the price is moving in the bullish scenario. As long as it is above the zero line it shows that the average price is moving up.

Bearish Scenario:- When MACD crosses below the zero line, it signifies that the price is moving in a bearish scenario. As long as it is below the zero line it shows that the average price is moving down.

Building MACD Trading Strategy in Mudrex

Strategy:- 

BUY:- MACD crossesup 10 with signal period of 9 days.

SELL:- MACD crossesdown (-10) with signal period of 9 days

TIME FRAME:- 2Hrs

Creating on Mudrex:- 

We will use 2 MACD indicator blocks. One for selling and One for buying.

For buying, we will use the following settings:-

For selling, we will use the following settings:-

Final Strategy:-

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 2H yielded an overall profit of 47.86%

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