Advanced MACD indicator: MACD NU
18 May 2021
In this article, we will be looking at the advanced indicator MACD NU technique. If you are unaware of the MACD, we recommend that you watch our MACD video to introduce you to the indicator.
Numerical utilisation looks at isolating the signal line in order to find indicator support and resistance for a selected cryptocurrency. This offers numerous benefits such as allowing for the identification of price reversal points and the viewing of momentum.
However, before going into how to conduct TA though MACD numerical utilisation (NU), firstly let's look at how to set up the MACD NU chart.
MACD NU set up
In the picture below we can see the traditional settings for the MACD. The signal line, MACD line and histogram are all being displayed.
For using the MACD NU you simply want to turn off the MACD and histogram so that it looks as shown below.
That is it, very simple. No need to change the inputs and precision etc.
How to use MACD NU
The MACD NU can be used on all timeframes. However it is by far most effective when used on the hourly chart. Traders use the MACD NU to identify key support and resistance lines.
For example, below we can see the identification of the major MACD resistance level between 19/02/21 - 11/06/21.
BTC/USD MACD NU resistance
During the same period of time we can then identify the support, as shown below.
BTC/USD MACD NU support
From here we can then identify a MACD NU range. In the chart below we can see the MACD NU range between 19/02/21 - 11/06/21.
BTC/USD MACD NU range 19/02/21 - 11/06/21
What can we do with this MACD NU range?
Peace of mind when HODLing
If a HODLer is seeing major losses, the MACD NU can provide reasons as to why the user should potentially not sell their cryptocurrency. Humans are most susceptible to emotions when extreme market events occur. For example during the mining outage on 18/04/21 BTC traders and HODLers would have seen BTC fall almost 20% in only a couple of hours. These sorts of losses can invoke potential panic selling. However, during this period the MACD was retesting a crucial MACD NU support level, the -1471 support level mentioned earlier. From this level BTC was at $51,000 USD even though it saw a rebound to $58,000 USD.
Signalling potential sell or buying periods
Through correct identification of MACD NU support and resistance points, we can identify potential sell and buy points.
For example, in the chart below we can see that between 26/04/21 - 10/06/21 the MACD NU numerical value of +832.98 provides a highly accurate sell signal.
BTC/USD - MACD NU sell signals
In each instance between the two dates the +832.98 level is seen extremely close to the top. Each time this level is hit, BTC proceeds to rise a little further before losing significant value over a short period of time.
|Cryptocurrency||Signal||Sell signal $ (USD)||% loss following signal||Time taken (hours)|
BTC/USD NU sell signals
As we can see, the sell signal in this instance is extremely useful and provides solid sell signals. However, it is important to note that the level which provides sell signals will eventually fail. The trader will be left missing out on further profits, or could get caught up in an unexpected fall. This is why it is important to have exit strategies in place.
The buy example with the MACD NU is similar to the MACD NU sell signals, although rather than selling on resistance - you are buying on support.
In the example below you can see the success of buying BTC at the +- 0 numerical value between 10/02/21 - 21/02/21
BTC/USD NU - buy signals
In each instance, once BTC hits the +- 0 level, the cryptocurrency decreases in value slightly before surging.
In the graph below we can see the accuracy of this buy signal in the selected time period.
|Cryptocurrency||Signal||Buy signal $ (USD)||% gain following signal||Time taken (hours)|
BTC/MACD NU - buy signals
In conclusion, the MACD NU indicator is powerful and provides accurate buy / sell signals. Utilising the MACD NU solely as the buy / sell signal for your portfolio and trading can be dangerous. This is because the MACD NU signals can be disturbed.
The disturber - MACD NU divergences
Divergences occur on all oscillators and can have a major effect on price action. For example, in the chart below we can see a major bearish RSI divergence on the BTC/USD daily chart.
Once this divergence was triggered, it sent BTC down from $64,000 USD to $30,000 USD with BTC losing over 50% of its value.
BTC/USD bearish RSI divergence
Like the RSI, the MACD NU can also see divergences. For example, in the chart below we can see a bullish MACD NU divergence between 17/04/21 - 25/04/21.
MACD NU BTC/USD bullish divergence
When trading divergences with the MACD NU on top of providing both bullish and bearish signals, they can help confirm breakouts / formations on the candlestick charts.
In the example above we can see that there is a bullish divergence. On the candlestick charts we can see that BTC was within a descending wedge. The bullish divergence on the hourly MACD NU chart increased the likelihood of a bullish breakout from the wedge. Additionally it increased the potential gains to be seen upon breakout.
MACD NU - BTC/USD Bullish divergence & descending wedge
In conclusion, divergences are sneaky and can majorly affect the success of a buy / sell strategy based on the MACD NU if not identified. However, if identified the trader can utilise the divergences to their advantage, allowing them to potentially profit from the divergences.
MACD NU conclusion
The MACD NU is a great indicator although it should be used alongside other indicators as with all indicators. It has periods of low reliability. From research, the indicators which are most effective with the MACD NU are:
- Williams % R
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