Section 3: MACD trades with the trend

MACD consists of red and green columns, fast line DIFF and slow line DEA. The red line is the 0 axis. The fast and slow lines form a golden cross and a dead cross.

The first thing to do in trading is to judge the trend, then follow the trend, and the third is execution. In theory, all dead crosses should be shorted, and golden crosses should be longed, but in actual trading, due to psychological hesitation, they are not strictly implemented. That is, I firmly believe that the correct trading system I have built will make me profitable. Even if the trading signal makes me lose money, I also firmly believe that the trading system will stop the loss in time and only cause a small loss, and I will make it back in the following market.

The MACD indicator will not immediately appear dead cross when the market falls, because of the lagging nature of the MACD indicator, and what we need is its trend signal. That is to say, if the decline in the market does not have enough strength, the MACD will not be a dead cross by the bulls. Combined with the double confirmation of the 0 axis to determine whether to be long or short. If the fast-slow line is above the 0 axis, the market is in a long trend, otherwise it is in a short state. If you do more, you only do more in the MACD golden cross above the 0 axis. However, the K line corresponding to the dead cross formed above the 0 axis has not fallen much, and the short position is weak. This is a callback, and the strength of the golden cross generated again must be powerful. In the same way, if the golden cross below the 0 axis is small and the K-line rises weakly, then when a dead cross short signal is generated, the short-selling accuracy rate is higher and the profit is greater. The trend in the trend refers to the direction, and the potential refers to the kinetic energy. If the previous rise is weak, it means that the bulls are weak, and there are only bulls and shorts in the market. Since the bulls are weak, when the bearish signal appears, the bears must be strong. This is the momentum.