MACD Crosses Strategy

Moving Average Convergence/Divergence Crossover Strategy – Introduction

MACD Crossover Trading Strategy – For this strategy we use the signal line and the MACD line itself and interpret their crossings as buy and sell signals. Thus, we use the Moving Average Convergence/Divergence similar to an oscillator and can additionally use its histogram for trend confirmation (we go into detail about the MACD histogram in our MACD Histogram Reversal Strategy). Even though this is a lagging indicator, we can profitably use the MACD’s crosses as long as we choose the right time frame for our trades.

At a glance – MACD Crossover Strategy for Crypto

Time needed: 8 Minuten.

The 3 steps of the MACD Crossover strategy explained:

  1. Display the MACD

    You can usually display the MACD directly on your exchange. Alternatively, you can use tools like TradingView.Show MACD Indicator for Histogram Reversal Strategy

  2. Recognize crosses and open a position

    If the blue MACD line crosses the signal line from top to bottom, open a short position. If there is a crossing in the other direction, open a long position. Be sure to set a stop loss!MACD Crosses Trading Strategy - Entry

  3. Take profits

    Once your position is in profit you can close it manually or with different stop loss orders.

How to trade the crossover strategy with the MACD

Step 1: Show the MACD indicator

Show MACD Indicator for Histogram Reversal Strategy
Show the MACD indicator on Bitfinex

As a first step, you should display the MACD indicator. On exchanges such as Bybit or Bitfinex you can display it directly under “Indicators” with the search “macd”. Alternatively, TradingView is a universal charting tool.

Step 2: Detect crossovers

In the picture we see the MACD line itself in blue and the signal line of the MACD in orange. Thereby, the MACD line reacts faster to price changes than the signal line in the standard configuration. From this follows:

  • The MACD line (blue) crosses signal line from top to bottom: This is a short-signal!
  • The signal line (orange) crosses the MACD line from top to bottom: This is a long-signal!
Entry points for the MACD Crosses Trading Strategy
Red arrows = short entries; green arrows = long entries.

If there is a short signal, you can open a short position and bet on falling prices. If there is a long signal, you can open a long position and bet on rising prices.

Be sure to place a stop-loss order to reduce any losses. This is especially important for this strategy, because the MACD crosses are lagging trading signals. So it can happen from time to time that the respective price movement has already taken place before a cross signals an entry point.

LineCrossesFromToOrder / Signal
MACD line (blue)Signal linetopbottomshort
Signal line (orange)MACD linetopbottomlong
Recognize crossovers in the MACD strategy

Step 3: Realizing profits

To realize your profits you have several options:

  • Manual: close your position once you are satisfied with the unrealized profit based on your risk-reward ratio. Alternative:
  • Set a stop-loss order: You can set a stop-loss as soon as you open your position. On the other hand, if the price rises towards profit, you can tighten your stop loss and realize your profit when the price reverses by triggering the stop loss.
  • Trailing stop: Analogous to a normal stop-loss order, you can also use a so-called trailing stop order. This follows the price at a distance specified by you.

It is recommended that you test several exit strategies with smaller sums. This will allow you to find the strategy that best suits your trading style and the asset you are trading.

Frequently asked questions and answers about the MACD Crossover Strategy

What is a crossover?

A crossover refers to the crossing of moving averages in technical chart analysis.

What is a bullish crossover?

A bullish crossover is when a faster (shorter) moving average crosses a slower (longer) MA from the bottom to the top.

What is a bearish crossover?

Ein bearisher Crossover liegt vor, wen ein schnellerer (kürzerer) Moving Average einen langsameren (längeren) MA von oben nach unten durchkreuzt.

What is a Golden Cross?

A golden cross occurs when the 50 moving average and the 200 MA cross. It is interpreted bearish (falling prices) when the 50 MA crosses the 200 MA from top to bottom. In the other direction, there is a bullish (rising prices) signal.

What is the Death Cross?

A death cross occurs when a faster (shorter) major moving average crosses a slower (longer) moving average from top to bottom. An example would be when the 50 MA crosses the 200 MA from top to bottom. This is seen as a strong bearish signal.

Important risk notice:
This service or the provider advertised here is only suitable for professional traders. Users without sufficient experience usually suffer a total losswhile trading here. Trading with leverage is highly risky and leads to poor risk management. Use this service only as a professional trader with sufficient experience in trading and leverage.

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