MACD Energies Trading Whipsaws and Fake Out Signals on Bearish and Bullish Territory

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

MACD Technical Indicator Energies Trading Whipsaw - Energies Trading Whipsaws

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

A energies whipsaw signal is as a result of dramatic rise and fall in the energies 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 energies whipsaw and withstand the whipsaw; a energies whipsaw might result into an upswing session and then a downswing session. To minimize the risk of trading energies whipsaws, it's good to wait for confirmation of energies signals by waiting for MACD to cross above or below the zero center-line mark.

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

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

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

• 1. Buy Energies Trading Signal in Bearish Territory Whipsaw

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

In the energies example illustrated and explained below, MACD indicator gives a buy signal even though it is in bearish territory, the MACD indicator then turns downwards and starts moving down again resulting into a energies 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 energies 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 energies technical indicator. In the energies example illustrated and explained below MACD is combined with the moving average energies indicators technical analysis.

MACD Energies Whipsaw - Buy Energies Trading Signal in Bearish Territory

• 2. Sell Energies Trading Signal in Bullish Territory Whipsaw

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

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

MACD Energies Whipsaw - Sell Energies Trading Signal in Bullish Territory

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