The MACD Crossover Indicator

3 min

Aug 2, 2024

Indicators

The MACD Crossover Indicator

The MACD Crossover Indicator

The MACD (Mean Average Convergence Divergence) indicator is a classic tool in traders' toolkits. It provides insights into the strength, momentum, and duration of a trend. The indicator consists of three main components: the MACD line (the difference between two moving averages), the Signal line (an exponential average of the MACD line), and the histogram, which represents the difference between the MACD line and the Signal line. In this indicator, we focus on the differences between two MACD lines derived from two different pairs of moving averages.

Lucas Inglese

Lucas Inglese

Trading Instructor

The MACD Crossover Block Configuration

On BullTrading, you have several options to configure each block uniquely. In this block, you can set the time unit, periods used, and more.

Time Unit

Since BullTrading allows for multi-timeframe strategies, you can select the time period for calculating this indicator. There are two options:

  • Default: If set to Default, the time unit will vary based on the timeframe used in the backtest.

  • 15m, 30m, 1d, etc.: Choosing a specific time unit means this setting will apply regardless of the time unit used for backtesting your strategy.

TIPS: If you’re a beginner, it’s recommended to leave the time unit on Default.

Period Slow 1 & 2

To create a MACD line, two moving averages are required. The "Period Slow" parameter represents the period used for the slow moving average needed to calculate the MACD line. "MACD 1 Period Slow" is the slow period for MACD 1, and "MACD 2 Period Slow" is the slow period for MACD 2.

Period Fast 1 & 2

Here, you define the period of the second moving average used in the MACD line calculation. "MACD 1 Period Fast" is the fast period for MACD 1, and "MACD 2 Period Fast" is the fast period for MACD 2.

Signal Type

This parameter has two options: CrossOver and Position. Here’s the difference:

  • CrossOver: If you select CrossOver as the signal type, this block will validate only when MACD 1 crosses above or below MACD 2.

  • Position: With this option, the block is validated as long as you are in the selected Trigger Type (Bearish or Bullish).

TIPS: The CrossOver parameter is more restrictive, making it useful when combining only one or two indicators. However, using too many blocks with CrossOver will significantly reduce the number of trades in your strategy, as it requires, for example, a crossover between the two MAs + a crossover at the RSI 70 threshold + a crossover in the Vortex indicator.

So, if you’re a beginner, avoid setting more than one or two blocks to CrossOver when combining multiple indicator blocks.

Trigger Type

This parameter has two options: Bullish or Bearish. Here’s the difference:

  • Bullish: If the trigger type is set to Bullish, the block is validated if MACD 1 is above MACD 2.

  • Bearish: If the trigger type is set to Bearish, the block is validated if MACD 1 is below MACD 2.

The MACD Crossover Block Configuration

On BullTrading, you have several options to configure each block uniquely. In this block, you can set the time unit, periods used, and more.

Time Unit

Since BullTrading allows for multi-timeframe strategies, you can select the time period for calculating this indicator. There are two options:

  • Default: If set to Default, the time unit will vary based on the timeframe used in the backtest.

  • 15m, 30m, 1d, etc.: Choosing a specific time unit means this setting will apply regardless of the time unit used for backtesting your strategy.

TIPS: If you’re a beginner, it’s recommended to leave the time unit on Default.

Period Slow 1 & 2

To create a MACD line, two moving averages are required. The "Period Slow" parameter represents the period used for the slow moving average needed to calculate the MACD line. "MACD 1 Period Slow" is the slow period for MACD 1, and "MACD 2 Period Slow" is the slow period for MACD 2.

Period Fast 1 & 2

Here, you define the period of the second moving average used in the MACD line calculation. "MACD 1 Period Fast" is the fast period for MACD 1, and "MACD 2 Period Fast" is the fast period for MACD 2.

Signal Type

This parameter has two options: CrossOver and Position. Here’s the difference:

  • CrossOver: If you select CrossOver as the signal type, this block will validate only when MACD 1 crosses above or below MACD 2.

  • Position: With this option, the block is validated as long as you are in the selected Trigger Type (Bearish or Bullish).

TIPS: The CrossOver parameter is more restrictive, making it useful when combining only one or two indicators. However, using too many blocks with CrossOver will significantly reduce the number of trades in your strategy, as it requires, for example, a crossover between the two MAs + a crossover at the RSI 70 threshold + a crossover in the Vortex indicator.

So, if you’re a beginner, avoid setting more than one or two blocks to CrossOver when combining multiple indicator blocks.

Trigger Type

This parameter has two options: Bullish or Bearish. Here’s the difference:

  • Bullish: If the trigger type is set to Bullish, the block is validated if MACD 1 is above MACD 2.

  • Bearish: If the trigger type is set to Bearish, the block is validated if MACD 1 is below MACD 2.

The MACD Crossover Block Configuration

On BullTrading, you have several options to configure each block uniquely. In this block, you can set the time unit, periods used, and more.

Time Unit

Since BullTrading allows for multi-timeframe strategies, you can select the time period for calculating this indicator. There are two options:

  • Default: If set to Default, the time unit will vary based on the timeframe used in the backtest.

  • 15m, 30m, 1d, etc.: Choosing a specific time unit means this setting will apply regardless of the time unit used for backtesting your strategy.

TIPS: If you’re a beginner, it’s recommended to leave the time unit on Default.

Period Slow 1 & 2

To create a MACD line, two moving averages are required. The "Period Slow" parameter represents the period used for the slow moving average needed to calculate the MACD line. "MACD 1 Period Slow" is the slow period for MACD 1, and "MACD 2 Period Slow" is the slow period for MACD 2.

Period Fast 1 & 2

Here, you define the period of the second moving average used in the MACD line calculation. "MACD 1 Period Fast" is the fast period for MACD 1, and "MACD 2 Period Fast" is the fast period for MACD 2.

Signal Type

This parameter has two options: CrossOver and Position. Here’s the difference:

  • CrossOver: If you select CrossOver as the signal type, this block will validate only when MACD 1 crosses above or below MACD 2.

  • Position: With this option, the block is validated as long as you are in the selected Trigger Type (Bearish or Bullish).

TIPS: The CrossOver parameter is more restrictive, making it useful when combining only one or two indicators. However, using too many blocks with CrossOver will significantly reduce the number of trades in your strategy, as it requires, for example, a crossover between the two MAs + a crossover at the RSI 70 threshold + a crossover in the Vortex indicator.

So, if you’re a beginner, avoid setting more than one or two blocks to CrossOver when combining multiple indicator blocks.

Trigger Type

This parameter has two options: Bullish or Bearish. Here’s the difference:

  • Bullish: If the trigger type is set to Bullish, the block is validated if MACD 1 is above MACD 2.

  • Bearish: If the trigger type is set to Bearish, the block is validated if MACD 1 is below MACD 2.

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