MACD Bitcoin Whipsaws and Fake Out Signals on Bearish & Bullish Territory
Since the MACD technical indicator is a leading indicator which sometimes gives whipsaws, we shall look at an example of a bitcoin trading whipsaw generated by this MACD cryptocurrency indicator, so as to illustrate why it's always good to wait for a confirmation bitcoin signal.
MACD Bitcoin Indicator Whipsaw - Bitcoin Trading Whipsaws
The MACD indicator gave a buy bitcoin trading signal, when this buy cryptocurrency signal was generated and the MACD indicator line was still below the zero center line mark. At this point the buy cryptocurrency signal had not been confirmed and it resulted into a bitcoin whipsaw as illustrated by the moving averages which continued to move downwards.
A bitcoin trading whipsaw signal is as a result of dramatic rise and fall in the bitcoin price in a short time and in such a manner that skews the data used in calculating the moving averages that draw the MACD cryptocurrency indicator data. These types of whipsaw moves are usually brought about because of some news event that can produce market noise.
Traders should have the ability to gauge a bitcoin trading whipsaw and withstand the whipsaw; a bitcoin trading whipsaw might result into an upswing session and then a downswing session. To minimize the risk of bitcoin trading whipsaws, it's good to wait for confirmation of bitcoin signals by waiting for MACD to cross above or below the zero center-line mark.
Combining MACD Crossover with Center-Line Crossover to Prevent Bitcoin Trading Whipsaws
Buy bitcoin trading signal - When there is a crossover, followed by a steep rise in bitcoin price and then a center-line crossover the buy cryptocurrency signal is confirmed.
Sell bitcoin trading signal - When there is a crossover, followed by a steep decline in bitcoin price and then a center-line crossover the sell cryptocurrency signal is confirmed.
1. Buy Bitcoin Signal in Bearish Territory Whipsaw
When a buy cryptocurrency signal is generated in a bearish territory, it might result into a bitcoin whipsaw especially if it isn't followed soon after by a MACD center line cross-over.
In the cryptocurrency trading example illustrated below, MACD cryptocurrency indicator gives a buy cryptocurrency signal even though it is in bearish territory, the MACD indicator then turns downwards and starts moving down again resulting into a bitcoin whipsaw. By waiting for center line cross-over it is possible to avoid the whipsaw.
However, in this case there was a brief center line crossing: this bitcoin trading whipsaw would have been hard to trade using this MACD cryptocurrency indicator alone, that is why it is good to combine the use of MACD indicator with another cryptocurrency indicator. In the cryptocurrency trading example illustrated below MACD is combined with the moving average crypto indicators technical analysis.
MACD Crypto Whipsaw - Buy Crypto Signal in Bearish Territory
2. Sell Bitcoin Signal in Bullish Territory Whipsaw
When a sell cryptocurrency signal is generated in a bullish territory, it might result into a bitcoin whipsaw especially if it isn't followed soon by a MACD center-line cross-over.
In the cryptocurrency trading example illustrated below, the MACD cryptocurrency indicator gives a sell cryptocurrency signal even though it is in bullish territory, the MACD cryptocurrency indicator then turns up and starts moving upwards again resulting into a bitcoin trading whipsaw. By waiting for center-line crossover it is possible to avoid the bitcoin trading whipsaw. In the cryptocurrency trading example illustrated below by combining this MACD indicator with the Moving Average Crossover Bitcoin Strategy you would have avoided this whipsaw.
MACD Crypto Whipsaw - Sell Crypto Signal in Bullish Territory
To avoid bitcoin trading whipsaws completely when trading the btcusd trading market with this MACD Bitcoin Indicator it is best to use the Center-line Crossover Signal as the Official Buy or Sell Bitcoin Trading Signal of the MACD Crypto Indicator.
