Chart Decoder Series: MACD – Momentum Signals to Find Early Entry

May 5th Chart Decoder Series: MACD – Momentum Signals to Find Early Entry

Welcome to Chart decoder seriesA step-by-step guide to mastering technical indicators and chart patterns like a professional.

In my previous post, I covered two important tools for understanding trend direction: SMA and EMA. So let’s talk about momentum. Specifically, the method Spot momentum shifts before it appears in the price.

input: MACD (Version of Moving Average Convergence).

What is MACD?

MACD represents the divergence of moving average convergence. Simply put, MACD is a momentum indicator. It shows whether the market is steaming in direction or losing its strength. In other words, “Is the market trying to move?”

Moving averages help you to see where The market is moving forward, MACD tells you how strong the movement is. It is one of the fastest ways to find early signs of a trend shift before prices react completely.

It is made up of three parts.

1. MACD Line (Blue)

Think of this with you Momentum Tracker.

It responds when the direction of the market is beginning to change, indicating whether it is gaining energy or slowing down.

2. Signal line (orange)

This line closely follows the MACD line.

• When the blue line crosses the orange line, it often means that the momentum is moving up (buy the signal)
• A blue line crosses below may mean that momentum is falling apart (sales signal)

3. Histogram bar (red or green bar)

These bars show The distance between the blue and orange lines.

Here’s how to read these:

• Growing bar = more momentum
• Reduced = momentum slows
• Green bar = bullish energy (buyer is active)
• Red bar = Bear pressure (seller is active)

Why use MACD?

MACD is ideal for identifying potential entry points and exit points. That tells you:

• When momentum is picked up
• If the trend is reversed
• When I sit tight and wait

Examples of behavior:

MACD indicator (lower panel)

• MACD Line (Blue): 326
• Signal line (orange): –279
• MACD lines crossed above signal lines: bullish crossover
• Histogram bar is green and growing: momentum is building
• This crossover occurred under the zero line: early signs of trend reversal

Moving Average (Main Chart)

• 20 Days EMA (Blue Line): ~84,067
• 50 Days MA (green line): ~84,170
• Current BTC price: 87,269. BTC price is On top of that Both averages, buyers are controlled and the trend is likely to continue.

Pro tips:
Combine MACD with EMA or SMA for strong confirmation
Use MACD crossover near major support/resistance for higher accuracy
Avoid relying solely on MACD in the landscape market – it can cause false signals

Try it now with Bitfinex:

• Log in to Bitfinex
• Select a trading pair (e.g. BTC/USD)
• From the (Indicator) tab, add “Macd”

Please note:

Bulling signal: MACD line crossing On top of that Signal line
Bearish signal: MACD line crossing Below Signal line
Growth of histogram bars: Trends are gaining momentum
Reducing histogram bar: Trends are slowing down

This practice builds intuition over time, allowing you to act with confidence rather than confusion.

MACD is a favorite among traders for reasons. It provides early insight into changes in momentum before price actions become clear.

MACD vs SMA/EMA: What is the actual difference?

It will be next in the chart decoder series. RSI – How to know when the market knows when it’s an acquisition or overselling.