{"id":2770,"date":"2025-12-19T12:43:29","date_gmt":"2025-12-19T07:43:29","guid":{"rendered":"https:\/\/bullcryptosignals.com\/blog\/?p=2770"},"modified":"2025-12-01T12:43:58","modified_gmt":"2025-12-01T07:43:58","slug":"macd-backtest-results-snp-gold-usd","status":"publish","type":"post","link":"https:\/\/bullcryptosignals.com\/blog\/macd-backtest-results-snp-gold-usd\/","title":{"rendered":"I Tested the MACD \u2014 Does It Actually Make Money?"},"content":{"rendered":"\r\n<h2 class=\"wp-block-heading\">Table of Contents<\/h2>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><a href=\"#why-i-dug-into-macd\">Why I dug into MACD<\/a><\/li>\r\n<li><a href=\"#what-is-macd-and-how-it-works\">What is MACD and how it works<\/a><\/li>\r\n<li><a href=\"#four-common-macd-strategies-traders-use\">Four common MACD strategies traders use<\/a><\/li>\r\n<li><a href=\"#why-macd-signals-sometimes-fail\">Why MACD signals sometimes fail<\/a><\/li>\r\n<li><a href=\"#how-i-tested-macd-method-and-markets\">How I tested MACD (method and markets)<\/a><\/li>\r\n<li><a href=\"#backtest-results-crossover-strategy\">Backtest results \u2014 crossover strategy<\/a><\/li>\r\n<li><a href=\"#backtest-results-trading-extremes\">Backtest results \u2014 trading extremes<\/a><\/li>\r\n<li><a href=\"#what-are-the-best-macd-settings\">What are the best MACD settings?<\/a><\/li>\r\n<li><a href=\"#practical-takeaways\">Practical takeaways<\/a><\/li>\r\n<li><a href=\"#faq\">FAQ<\/a><\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"why-i-dug-into-macd\">Why I dug into MACD<\/h2>\r\n\r\n\r\n\r\n<p>I spent a week researching the <a href=\"https:\/\/bullcryptosignals.com\/blog\/crypto-scalping-signals\" target=\"_blank\" rel=\"noopener\">MACD<\/a>, testing popular strategies, and <a href=\"https:\/\/www.quantstart.com\/articles\/Beginners-Guide-to-Quantitative-Trading\/\" target=\"_blank\" rel=\"noopener\">backtesting<\/a> thousands of parameter combinations across multiple markets. The goal was simple: figure out how useful <a href=\"https:\/\/bullcryptosignals.com\/blog\/what-are-crypto-signals-a-guide-to-smarter-trading\" target=\"_blank\" rel=\"noopener\">MACD signals<\/a> actually are, which strategies have an edge, and whether the default settings are optimal. The short takeaway: MACD can be powerful, but it is not a magic formula. Context and testing matter.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"what-is-macd-and-how-it-works\">What is MACD and how it works<\/h2>\r\n\r\n\r\n\r\n<p>The <a href=\"https:\/\/www.investopedia.com\/terms\/m\/macd.asp\" target=\"_blank\" rel=\"noopener\">MACD<\/a> stands for <strong>Moving Average Convergence Divergence<\/strong>. It compares two <a href=\"https:\/\/corporatefinanceinstitute.com\/resources\/career-map\/sell-side\/capital-markets\/exponential-moving-average-ema\/\" target=\"_blank\" rel=\"noopener\">exponential moving averages<\/a> to measure momentum and has four main parts: the MACD line, the <a href=\"https:\/\/en.wikipedia.org\/wiki\/MACD\" target=\"_blank\" rel=\"noopener\">signal line<\/a>, the <a href=\"https:\/\/www.investopedia.com\/articles\/technical\/091001.asp\" target=\"_blank\" rel=\"noopener\">histogram<\/a> (the difference between the two lines), and the <a href=\"https:\/\/stockcharts.com\/articles\/stocktalk\/2024\/12\/master-the-macd-zero-line-for-687.html\" target=\"_blank\" rel=\"noopener\">zero line<\/a> which marks the center. The default inputs are 12 for the fast EMA, 26 for the slow EMA, and 9 for the signal smoothing, but these can be changed.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"four-common-macd-strategies-traders-use\">Four common MACD strategies traders use<\/h2>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">1. Crossovers (histogram color change)<\/h3>\r\n\r\n\r\n\r\n<p>Buy when the MACD line crosses above the signal line (histogram turns green). Sell when it crosses below (histogram turns red). The logic: short-term momentum overtakes long-term momentum for a potential trend.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/macd-histogram-crossover-closeup.jpg\" alt=\"Close-up MACD indicator histogram turning from red to green with MACD and signal lines below and an arrow pointing at the first green bar\" \/><\/figure>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">2. Divergence<\/h3>\r\n\r\n\r\n\r\n<p>Look for price making higher highs while MACD fails to make higher highs (bearish <a href=\"https:\/\/www.ig.com\/en\/trading-strategies\/how-to-trade-bullish-and-bearish-divergences-191004\" target=\"_blank\" rel=\"noopener\">divergence<\/a>), or price making lower lows while MACD does not (bullish divergence). This attempts to spot weakening momentum before a reversal.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/price-macd-divergence-example.jpg\" alt=\"candlestick price chart with MACD indicator below illustrating mismatch between price highs and MACD peaks\" \/><\/figure>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">3. Trading extremes<\/h3>\r\n\r\n\r\n\r\n<p>Enter against extreme spikes in the histogram. The idea: when momentum becomes extreme, a pause or reversal is likely. This strategy looks for MACD readings in the top or bottom percentiles of their historical distribution.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/macd-extreme-histogram-spike.jpg\" alt=\"candlestick chart with a circled extreme green candle and a matching large MACD histogram spike\" \/><\/figure>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">4. MACD as a trend filter<\/h3>\r\n\r\n\r\n\r\n<p>Use MACD on a higher timeframe to define the bias for your trading timeframe. For example, if you trade daily but the weekly MACD histogram is positive, favor long trades; if negative, favor shorts. This is simply a way to align with higher-timeframe momentum instead of trading against it.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/weekly-macd-trend-filter.jpg\" alt=\"MACD histogram and signal lines labeled '1 WEEK' showing weekly momentum\" \/><\/figure>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"why-macd-signals-sometimes-fail\">Why MACD signals sometimes fail<\/h2>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>Crossovers can be whipsaws:<\/strong> Momentum can weaken briefly and then resume, producing false exits and re-entries.<\/li>\r\n<li><strong>Divergence is subjective:<\/strong> Two traders can look at the same chart and call divergence differently. That makes reliable backtesting and mechanical rules difficult.<\/li>\r\n<li><strong>Extremes can keep going:<\/strong> A very large MACD reading does not guarantee an immediate reversal. Extreme momentum can extend further.<\/li>\r\n<li><strong>Trend filters need context:<\/strong> Using a higher timeframe MACD can help, but many traders prefer a straightforward trend measure like a 200-period EMA to decide bias.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/macd-divergence-closeup.jpg\" alt=\"Close-up of the MACD histogram with blue and orange signal lines and a white trendline marking rising MACD lows (divergence)\" \/><\/figure>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"how-i-tested-macd-method-and-markets\">How I tested MACD (method and markets)<\/h2>\r\n\r\n\r\n\r\n<p>To keep results objective I focused on mechanical rules and historical data. I removed divergence from the formal backtests because it is too subjective and hard to quantify. I also excluded the trend-filter-only approach as a stand-alone strategy because it is usually combined with other entries.<\/p>\r\n\r\n\r\n\r\n<p>That left two strategies to test mechanically:<\/p>\r\n\r\n\r\n\r\n<ol class=\"wp-block-list\">\r\n<li>MACD crossover: enter long when the histogram is positive; enter short when negative. Daily timeframe tests.<\/li>\r\n<li>MACD extremes: detect historical top or bottom 5 percent histogram readings (converted to a percentage of price range so a bot can detect extremes) and measure subsequent returns.<\/li>\r\n<\/ol>\r\n\r\n\r\n\r\n<p>Markets tested: S&amp;P 500, gold, and the <a href=\"https:\/\/www.cnbc.com\/quotes\/.DXY\/\" target=\"_blank\" rel=\"noopener\">US Dollar Index<\/a>. Timeframe for the core backtests: daily (results cover 1928 to 2018 for the S&amp;P example).<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/timeframe-menu-and-candlestick-chart.jpg\" alt=\"chart interface with timeframe menu (5 minutes highlighted) and candlestick price chart, showing options including '1 day' and '1 week'\" \/><\/figure>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"backtest-results-crossover-strategy\">Backtest results \u2014 crossover strategy<\/h2>\r\n\r\n\r\n\r\n<p>Summary of what happened when the strategy was automated (enter long only when histogram positive, short only when negative):<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>S&amp;P 500: Bullish MACD signals produced some gains but neither long-only nor short-only MACD strategies beat a simple buy-and-hold of the index. Buy-and-hold outperformed the mechanical MACD crossover on this long-term test.<\/li>\r\n<li>Gold: Long-only MACD entries outperformed buy-and-hold on gold. Short entries were positive but weaker.<\/li>\r\n<li>US Dollar Index: The short-only MACD strategy performed best for the dollar index; long-only came second. Both were well above buy-and-hold for that market.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/sp500-crossover-backtest-chart.jpg\" alt=\"Long-term equity curve chart comparing buy-and-hold (blue), long-only (red) and short-only (green) MACD crossover strategies for the S&amp;P 500\" \/><\/figure>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"backtest-results-trading-extremes\">Backtest results \u2014 trading extremes<\/h2>\r\n\r\n\r\n\r\n<p>To quantify extremes, I converted the MACD histogram into a percentage measure so the algorithm could find top and bottom 5 percent readings and then track what came next.<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>S&amp;P 500: Extremely high MACD readings tended to be followed by more upside rather than immediate reversals. In other words, momentum often persisted after a big spike.<\/li>\r\n<li>Gold: No clear statistical edge when trading extremes. Top 5 percent and bottom 5 percent readings did not reliably predict direction.<\/li>\r\n<li>US Dollar Index: Extremes tended to produce more extremes \u2014 a high histogram often preceded further dollar strength and a low reading preceded continued weakness.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/sp500-macd-top-5-percent-results.jpg\" alt=\"Chart titled 'S&amp;P 500 after MACD histogram is in the top 5% of readings' with green\/red signal dots across a timeline and a table of 1-week to 1-year returns.\" \/><\/figure>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"what-are-the-best-macd-settings\">What are the best MACD settings?<\/h2>\r\n\r\n\r\n\r\n<p>Default settings are 12, 26, 9. I asked a bot to brute-force test every integer combination between 2 and 60 for the fast, slow, and signal lengths on the S&amp;P 500 using simple rules: enter long when histogram is positive and exit when it turns negative. Tests ran on daily and weekly timeframes.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bullcryptosignals.com\/blog\/wp-content\/uploads\/2025\/11\/macd-vs-buy-hold-returns-9-41-5-78.jpg\" alt=\"infographic card showing average yearly returns with a grey and purple growth chart and the text 'MACD 9.41% BUY &amp; HOLD 5.78%'\" \/><\/figure>\r\n\r\n\r\n\r\n<p>Results found optimal past settings (remember these are historical-best and not guaranteed to work going forward):<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>Daily optimal: <strong>2, 60, 2<\/strong> \u2014 average profit about <strong>9.41% per year<\/strong> versus buy-and-hold at <strong>5.78% per year<\/strong> (dividends not reinvested in that comparison).<\/li>\r\n<li>Weekly optimal: <strong>30, 57, 27<\/strong> \u2014 strategy averaged <strong>6.12% per year<\/strong> versus buy-and-hold at <strong>5.78% per year<\/strong>.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>Key point: the best settings from historical data were not the defaults. That underlines the value of testing rather than assuming the factory values are ideal for your market and timeframe.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"practical-takeaways\">Practical takeaways<\/h2>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>MACD is useful but not infallible:<\/strong> It gives insight into momentum and can be an effective part of a trading plan, but it should not be treated as a single-source, exact signal.<\/li>\r\n<li><strong>Test for your market and timeframe:<\/strong> Optimal settings vary. Brute-force backtesting helped find non-default parameters that worked historically for the S&amp;P 500.<\/li>\r\n<li><strong>Combine tools:<\/strong> Use MACD with price action, trend measures like a 200 EMA, risk management rules, and other indicators to reduce false signals.<\/li>\r\n<li><strong>Beware of subjectivity:<\/strong> Divergence looks powerful in hindsight but suffers from inconsistent interpretation in live trading and is hard to backtest mechanically.<\/li>\r\n<li><strong>Past performance is not a promise:<\/strong> Backtesting reveals historical edges but market regimes change. Keep adapting and re-testing.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"faq\">FAQ<\/h2>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">What does MACD stand for and what does it measure?<\/h3>\r\n\r\n\r\n\r\n<p>MACD stands for Moving Average Convergence Divergence. It measures momentum by comparing two exponential moving averages and plotting the difference as the histogram, alongside a signal line and zero center to indicate trend strength and direction.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">Are the default MACD settings the best?<\/h3>\r\n\r\n\r\n\r\n<p>Not necessarily. Defaults are 12, 26, 9, but backtests showed different settings (for example, 2, 60, 2 on the S&amp;P daily test) produced higher historical returns. Optimal settings depend on market and timeframe, so test before adopting.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">Which MACD strategy performed best in tests?<\/h3>\r\n\r\n\r\n\r\n<p>Results varied by market. For crossovers, MACD long-only did not beat <a href=\"https:\/\/en.wikipedia.org\/wiki\/Buy_and_hold\" target=\"_blank\" rel=\"noopener\">buy-and-hold<\/a> on the S&amp;P but outperformed buy-and-hold on gold. For the US Dollar Index, short-only crossovers did very well. Extremes showed persistence in the S&amp;P and USD, but no edge in gold.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">Can I use MACD alone for trading?<\/h3>\r\n\r\n\r\n\r\n<p>Relying solely on MACD is risky. It should be part of a broader system that includes trend context, risk management, price action, and other indicators. Mechanical backtests can reveal edges, but combining signals usually improves reliability.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\">How should I decide which MACD settings to use?<\/h3>\r\n\r\n\r\n\r\n<p>Backtest combinations on the specific market and timeframe you trade. Avoid assuming defaults are best. Also periodically re-test because market behavior changes over time.<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>Table of Contents Why I dug into MACD What is MACD and how it works Four common MACD strategies traders use Why MACD signals sometimes fail How I tested MACD (method and markets) Backtest results \u2014 crossover strategy Backtest results \u2014 trading extremes What are the best MACD settings? Practical takeaways FAQ Why I dug [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":2762,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[250],"tags":[288,252],"class_list":{"0":"post-2770","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-crypto-learnings","8":"tag-backtest","9":"tag-macd"},"_links":{"self":[{"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/posts\/2770","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/comments?post=2770"}],"version-history":[{"count":1,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/posts\/2770\/revisions"}],"predecessor-version":[{"id":2771,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/posts\/2770\/revisions\/2771"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/media\/2762"}],"wp:attachment":[{"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/media?parent=2770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/categories?post=2770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bullcryptosignals.com\/blog\/wp-json\/wp\/v2\/tags?post=2770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}