How to operate the monthly MACD turning red for the second time + weekly KD golden cross + daily line daily limit?

When the monthly MACD turns red for the second time, it signals renewed bearish momentum after a failed recovery, reinforcing a long-term downtrend.

Jul 29, 2025 at 09:49 pm

Understanding the Monthly MACD Turning Red for the Second Time

The MACD (Moving Average Convergence Divergence) is a momentum indicator that tracks the relationship between two moving averages of a cryptocurrency’s price. When the MACD line crosses below the signal line, the histogram turns red, indicating bearish momentum. A second occurrence of the MACD turning red on the monthly chart suggests a reinforced downtrend after a temporary recovery. This is significant because monthly data reflects long-term market sentiment.

To identify this pattern:

• Open a cryptocurrency trading chart (e.g., on TradingView or Binance).
• Set the timeframe to 1 month (1M).
• Apply the standard MACD indicator (12, 26, 9).
• Observe when the MACD histogram first turns red — this marks the initial bearish shift.
• Wait for a recovery phase where the histogram turns green (bullish).
• Monitor for the second red transition — this confirms renewed downward momentum.

This second red signal implies that bullish attempts to recover have failed, increasing the likelihood of prolonged bearish pressure. Traders interpret this as a warning sign, especially when combined with other indicators.

Recognizing the Weekly KD Golden Cross

The KD indicator (Stochastic Oscillator) consists of two lines: %K (fast line) and %D (slow line). A golden cross occurs when %K crosses above %D in the oversold region (typically below 20), signaling a potential upward reversal.

To detect this on the weekly chart:

• Switch to the 1-week (1W) timeframe.
• Add the Stochastic indicator with default settings (14, 3, 3).
• Identify periods where both %K and %D are below 20 — this indicates oversold conditions.
• Watch for the moment %K crosses upward over %D — this is the weekly KD golden cross.

This cross is more reliable than daily signals due to the longer timeframe, reducing noise. When it occurs after a prolonged downtrend, it suggests accumulating interest from buyers. However, it should not be used in isolation. The confluence with the monthly MACD signal strengthens its validity, as it shows a shift from long-term bearishness to potential medium-term bullish recovery.

Identifying Daily Line Reaching Daily Limit Up

In cryptocurrency markets, especially on exchanges with price limits (like some altcoin pairs on regulated platforms), the daily limit up refers to the maximum allowable price increase within a 24-hour period. When a cryptocurrency hits this ceiling, it closes at the upper boundary, often accompanied by high volume and strong buying pressure.

To confirm this:

• Use the daily (1D) chart.
• Observe whether the candlestick closes at or near its high, with minimal upper wick.
• Check exchange rules — some platforms impose +10% or +30% daily caps on certain tokens.
• Confirm via trading data: price reached the limit, volume spiked, and order book shows overwhelming buy-side dominance.

A daily limit up candle indicates intense bullish sentiment. When this occurs alongside the monthly and weekly signals, it may represent a breakout from a consolidation phase. This is particularly meaningful if it follows the weekly KD golden cross, suggesting momentum is accelerating.

Combining the Three Signals for Entry

The strategy involves waiting for all three conditions to align before considering a long position. The sequence of confirmation matters:

• The monthly MACD turning red for the second time establishes the background — a failed recovery in a bearish cycle.
• The weekly KD golden cross suggests a medium-term reversal is forming.
• The daily limit up acts as the trigger — real-time confirmation of bullish momentum.

Steps to verify confluence:

• Ensure the monthly MACD has completed its second red transition.
• Confirm the weekly KD cross occurred within the last 1–2 weeks.
• Wait for a daily candle to close at the daily limit up, preferably with volume 2x the 20-day average.

Entry execution:

• Place a buy order at the close of the limit-up candle or at the opening of the next day.
• Set a stop-loss slightly below the daily candle’s low.
• Use a position size that accounts for volatility, especially after limit moves.

This combination filters out false signals by requiring alignment across timeframes — monthly (long-term), weekly (intermediate), and daily (short-term).

Practical Example Using Binance and TradingView

To apply this strategy using real tools:

On TradingView:

• Open a chart for a cryptocurrency like BNB/USDT.
• Click the timeframe dropdown and select 1M — apply MACD. Note when the histogram turns red the second time.
• Change to 1W — add Stochastic. Wait for %K to cross above %D under 20.
• Switch to 1D — monitor for a green candle that hits the upper price boundary with high volume.

On Binance:

• Navigate to the spot trading interface.
• Select the same trading pair.
• Enable the same indicators via “Indicators” button.
• Use the “Alerts” function to set notifications:
  • MACD histogram below zero on monthly.
  • Stochastic %K crossing %D upward on weekly.
  • Price change exceeding 90% of the daily theoretical limit.

When all alerts trigger, review order book depth and recent trades. If buy walls dominate and funding rates (for futures) are neutral, consider entering a spot position.

Risk Management and Position Sizing

Even with strong confluence, risk must be controlled:

• Allocate no more than 2–5% of total portfolio value per trade.
• Set stop-loss at 1.5x the average daily range below entry.
• Avoid leverage if the monthly trend remains bearish.
• Monitor for whale transactions via on-chain tools like Lookonchain or Nansen to detect large sell-offs.

Exit partially if the daily candle following the limit-up shows a long upper wick or volume decline — this may indicate exhaustion.

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Frequently Asked Questions

What if the monthly MACD turns red twice but the weekly KD hasn’t formed a golden cross yet?

Wait for the weekly signal. The second red MACD alone indicates continued bearishness. Without the KD cross, there’s no confirmation of reversal momentum. Entering early increases the risk of catching a falling knife.

Can this strategy be applied to Bitcoin or only altcoins?

It can be applied to any cryptocurrency with sufficient price history and volatility. However, Bitcoin rarely hits daily limits on major exchanges due to high liquidity. The signal is more relevant for mid-cap altcoins listed on exchanges with price bands.

How do I confirm a daily limit up if the exchange doesn’t display it clearly?

Calculate the theoretical limit based on the previous day’s close. For a 10% rule, multiply the prior close by 1.10. If the current price reaches that level and stops rising despite high buy volume, it’s likely at the limit. Check the exchange’s trading rules page for official limits.

Does the order of signal appearance matter?

Yes. The ideal sequence is: monthly MACD second red → weekly KD golden cross → daily limit up. If the daily limit occurs before the weekly cross, it may be a fake breakout. Always verify that the weekly signal precedes or coincides with the daily move.