MACD Commodity Trading Whipsaws and Fake Out Signals on Bearish & Bullish Territory

Since the MACD indicator is a leading indicator which sometimes gives whipsaws, we shall look at an example of a commodity whipsaw generated by this MACD indicator, so as to illustrate why it's always good to wait for a confirmation commodities trading signal.

MACD Technical Indicator Commodity Trading Whipsaw - Commodity Trading Whipsaws

The MACD indicator gave a buy commodity signal, when this buy commodity signal was generated and the MACD indicator line was still below the zero center line mark. At this point the buy commodity signal had not been confirmed and it resulted into a commodity whipsaw as illustrated by the moving averages which continued to move downwards.

A commodity whipsaw signal is as a result of dramatic rise and fall in the commodities price in a short time and in such a manner that skews the data used in calculating the moving averages that draw the MACD 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 commodity whipsaw and withstand the whipsaw; a commodity whipsaw might result into an upswing session and then a downswing session. To minimize the risk of trading commodity whipsaws, it's good to wait for confirmation of commodity signals by waiting for MACD to cross above or below the zero center-line mark.

Combining MACD Crossover with Center-Line Crossover to Prevent Commodity Trading Whipsaws

Buy commodities trading signal - When there is a crossover, followed by a steep rise in commodities price and then a center-line crossover the buy commodity signal is confirmed.

Sell commodities trading signal - When there is a crossover, followed by a steep decline in commodities price and then a center-line crossover the sell commodity signal is confirmed.

• 1. Buy Commodity Trading Signal in Bearish Territory Whipsaw

When a buy commodity signal is generated in a bearish territory, it might result into a commodity whip saw especially if it is not followed soon by a MACD center line crossover.

In the commodity example illustrated and explained below, MACD indicator gives a buy commodity signal even though it is in bearish territory, the MACD indicator then turns downwards and starts moving down again resulting into a commodity whipsaw. By waiting for center line crossover it is possible to avoid the whipsaw.

However, in this case there was a brief center line crossing: this commodity whipsaw would have been hard to trade using this MACD indicator alone, that is why it is good to combine the use of MACD indicator with another commodity technical indicator. In the commodity example illustrated and explained below MACD is combined with the moving average commodity indicators technical analysis.

MACD Commodity Whipsaw - Buy Commodity Signal in Bearish Territory

• 2. Sell Commodity Signal in Bullish Territory Whipsaw

When a sell commodity signal is generated in a bullish territory, it might result into a commodity whip saw especially if it is not followed soon by a MACD center-line crossover.

In the commodity example illustrated and explained below, the MACD indicator gives a sell commodity signal even though it is in bullish territory, the MACD indicator then turns up and starts moving upwards again resulting into a commodity whipsaw. By waiting for center-line crossover it is possible to avoid the commodity whipsaw. In the commodity example illustrated and explained below by combining this MACD indicator with the Moving Average Crossover Commodity Strategy you would have avoided this whipsaw.

MACD Commodity Whipsaw - Sell Commodity Signal in Bullish Territory

To avoid commodity whipsaws completely when trading the commodity market with this MACD Commodities Technical Indicator it is best to use the Center-line Crossover Signal as the Official Buy or Sell Commodity Trading Signal of The MACD Indicator.