Can technical indicators bring stable profits? The real insights from five years of MACD backtesting

In the cryptocurrency market over the past five years, the effectiveness of technical indicators has been a subject of ongoing debate. Through systematic backtesting of the classic MACD indicator on BTC and ETH, we have uncovered a sobering reality: whether technical indicators can generate excess returns for investors entirely depends on the chosen cycle and leverage configuration. Simply put, incorrect application not only fails to create value but can also become a “funds devourer.”

Benchmark for Holding Coins: The Passing Line Technical Indicators Must Beat

Before evaluating any active trading strategy, we need to see how much can be earned by doing nothing. Based on the spot trading data from the past five years:

• Bitcoin pure spot holding: return of +48.86%
• Ethereum pure spot holding: return of +53.00%

This means that if investors bought and held five years ago until now, they could have earned nearly 50% just by “lying flat.” This benchmark is a hurdle for any technical indicator strategy — regardless of the method used, it must outperform this return to prove the value of active trading.

Current market real-time data shows BTC at $89.30K (24h decline -1.74%), ETH at $2.97K (24h decline -4.05%), with market volatility still intense. This further emphasizes the importance of long-term holding.

Why Do Technical Indicators Fail Significantly in Short Cycles

Raw data exposes a brutal fact: in short cycles such as 15 minutes, 30 minutes, and 1 hour, MACD technical indicators perform almost entirely disastrously.

Three main reasons for failure in short cycles:

First is market noise erosion. Fluctuations at the 15-minute level are mostly random and not true trends. Technical indicators tend to generate many false signals, leading to frequent wrong entries and stop-losses.

Second is costs from fees and slippage. High-frequency trading incurs costs for opening and closing positions and slippage, which accumulate rapidly with high trading frequency, ultimately eroding all potential profits.

Third is psychological interference. Short-cycle trading forces traders to make frequent decisions, easily leading to over-Stop-lossing and chasing gains, further amplifying losses.

Taking BTC on the 1-hour cycle as an example: using a no-leverage MACD strategy, the five-year return is only +6%, far below the +48.86% of simply holding coins. Traders spend five years monitoring the market and trading frequently, but only earn about 1/8 of the holding return. Even worse, on 15-minute and 30-minute cycles, almost all MACD configurations suffer losses or even liquidation, rendering the indicator completely ineffective in these cycles.

The Value of Technical Indicators in Long Cycles

Only when the time cycle is extended to 4 hours does the technical indicator show the ability to outperform the “lying flat” strategy. This is the only meaningful purpose of quantitative trading.

BTC performance on the 4-hour cycle:

Using a no-leverage MACD strategy, BTC’s five-year return reaches +96%, successfully surpassing the +48.86% holding benchmark. The logic behind this success is that MACD at the 4-hour level can effectively identify major trends, successfully avoiding the deep bear market dip in 2022. Although it may miss some upside in a bull market, the advantage of avoiding risk during sideways or downturns ultimately doubles the strategy’s returns.

ETH’s absolute dominance on the 4-hour cycle:

ETH performs even more impressively. The no-leverage MACD strategy yields a return of +205%, nearly 4 times the holding benchmark of +53.00%. This indicates ETH’s strong trendiness, allowing technical indicators to more effectively capture its volatility cycles. While holders enjoyed the upside, they also endured a deep retracement of -80%. The MACD strategy, by staying in cash during bear markets to protect profits and compounding during the next bull run, achieved returns far exceeding simple holding.

The Amplifying Effect of Leverage: Sweet Spot and Trap Zone

Leverage is a double-edged sword. When used correctly in the right cycle and at reasonable multiples, it can significantly amplify returns; overuse, however, can lead to catastrophic results.

Optimal leverage (2x-3x) golden zone:

Taking BTC on the 4-hour cycle as an example, using 3x leverage with MACD yields a return of +207%, doubling the +96% of no leverage. This shows that leverage in this configuration acts as a “tailwind” — the strategy captures real trends, and leverage simply magnifies correct decisions’ gains.

ETH performs even better. With a 3x leverage MACD strategy on the 4-hour cycle, returns soar to +552%, 2.7 times the no-leverage result and over 10 times the holding benchmark. This represents the peak performance of quantitative trading — leveraging the high volatility of ETH with technical indicators and reasonable leverage to achieve leapfrog gains.

Over-leverage (5x and above) trap zone:

However, when leverage increases to 5x, returns surprisingly decline. ETH on the 4-hour cycle with 5x leverage yields +167%, still above the holding benchmark but far below the +552% with 3x leverage and +205% with no leverage.

What does this “inversion” indicate? When leverage is too high, the technical indicator strategy cannot generate enough winning probability to bear this increased risk. Meanwhile, investors face higher funding costs, greater volatility wear, and the risk of liquidation, ultimately leading to returns that are lower than lower-leverage setups. In such cases, users are essentially “working for” the exchange and the market.

Best Practice Recommendations for Applying Technical Indicators

Based on the above data analysis, we can offer clear strategy suggestions for investors with different risk tolerances.

Conservative investors (prioritizing stability):

• Strategy: Pure holding or MACD 4-hour no-leverage
• Expected return: 50%-100%
• Key points: No frequent trading needed; tolerate asset drawdowns; long-term gains are already substantial

Progressive investors (seeking excess returns):

• Strategy: MACD 4-hour cycle with 1.5x-2x leverage
• Expected return: 150%-200%
• Key points: Strictly follow the 4-hour cycle discipline; avoid short-cycle trading; establish clear stop-loss rules

Aggressive investors (focused on high-volatility assets):

• Strategy: MACD 4-hour cycle with ETH, using 2x-3x leverage
• Expected return: 400%-550%
• Key points: This is the optimal sweet spot for technical indicator strategies. Leverage ETH’s high volatility with moderate leverage, keeping within 3x, to achieve exponential gains.

Serious warning against short-cycle high-leverage trading:

• Strategy: 15-minute or 30-minute cycle + 5x or higher leverage
• Expected outcome: -100% (complete liquidation)
• Risk assessment: Five-year data proves such operations almost inevitably lead to losses; returns are worse than donating the capital, and are purely gambling rather than investing.

The True Meaning of Technical Indicators

Five years of backtesting reveal a core truth: Technical indicators are not profit-generating tools themselves but tools for cycle and risk management.

Whether MACD and similar indicators can generate profits depends on three factors: first, correct cycle selection (4 hours); second, rational leverage (2x-3x); third, strict risk discipline (adherence to trading rules and timely stop-loss). Any deviation turns technical indicators from profit tools into loss accelerators.

Compared to the passing line of +50% for simply holding, all excessive trading and aggressive leverage are unnecessary. But for traders willing to invest time and effort in disciplined execution, combining technical indicators with a 4-hour cycle and moderate leverage can indeed open the door to excess returns — a fact that data cannot deny.

Ultimately, the decision rests with each investor. The choice depends on their understanding of risk, discipline, and deep comprehension of the true nature of technical indicators.

This article’s data is based on historical backtesting analysis and does not guarantee future performance. Market and leverage risks coexist; trading decisions should be made cautiously.