Moving Average Convergence and Divergence MACD Classic Bullish and Bearish Divergence
Moving Average Convergence and Divergence MACD Classic divergence is used as a possible sign for a trend reversal. Classic divergence is used when looking for an zone where price could reverse & start going in opposite direction. For this reason classic divergence is used as a low risk entry technique and also as an accurate way of exit out of a trade.
1. It is a low risk method to sell near the market tops or buy near the market bottoms, this makes the risk on your trades are very small relative to the potential reward.
2. It is used to predict the optimum point at which to exit a Forex trade.
There are two types:
- Classic Bullish FX Trading Divergence
- Classic Bearish Divergence
Classic Bullish Forex Trading Divergence
Classic bullish divergence occurs when price is making lower lows (LL), but the oscillator technical indicator is forming higher lows ( HL ).
Moving Average Convergence & Divergence MACD Classic Bullish Divergence
Classic bullish divergence warns of a possible change in trend from down to up. This is because even though the price went lower the volume of sellers who pushed the price lower was less as illustrated by the Moving Average Convergence and Divergence MACD indicator. This is an technical indicator of the underlying weakness of the downwards trend.
Classic bearish FX Trading Divergence Setup
Classic bearish divergence occurs when price is making a higher high (HH), but the oscillator technical indicator is showing a lower high ( LH ).
Moving Average Convergence & Divergence MACD Classic Bearish Divergence
Classic bearish divergence warns of a possible change in the trend from up to down. This is because even though the price went higher the volume of buyers that pushed the price higher was less as illustrated by the Moving Average Convergence and Divergence MACD indicator. This is an technical indicator of the underlying weakness of the upwards trend.
