MACD Commodity 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 trading whipsaw generated by this MACD indicator, so as to illustrate why it's always good to wait for a confirmation commodity signal.

MACD Commodity Technical Indicator Whipsaw - Commodity 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 commodity whipsaw as illustrated by the moving averages which continued to move downwards.

A commodity trading whipsaw signal is as a result of dramatic rise and fall in the commodity 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 trading whipsaw and withstand the whipsaw; a commodity trading whipsaw might result into an upswing session and then a downswing session. To minimize the risk of commodity trading 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 commodity trading signal - When there is a crossover, followed by a steep rise in commodity price and then a center-line crossover the buy signal is confirmed.

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

• 1. Buy Commodity Signal in Bearish Territory Whipsaw

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

In the commodities trading example shown 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 commodity whipsaw. By waiting for center-line cross over it's possible to avoid the whipsaw.

However, in this case there was a brief center line crossing: this commodity trading 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 commodities trading technical indicator. In the commodities trading example shown below MACD is combined with the moving average commodity indicators technical analysis.

MACD Commodity Trading Whipsaw - Buy Commodity Trading Signal in Bearish Territory

• 2. Sell Commodity Trading Signal in Bullish Territory Whipsaw

When a sell 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 cross-over.

In the commodities trading example shown 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 commodity trading whipsaw. By waiting for center-line crossover it is possible to avoid the commodity trading whipsaw. In the commodities trading example shown below by combining this MACD indicator with the Moving Average Crossover Commodity Trading Strategy you would have avoided this whipsaw.

MACD Commodity Trading Whipsaw - Sell Commodity Trading Signal in Bullish Territory

To avoid commodity trading whipsaws completely when trading the commodities trading market with this MACD Commodity 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.