MACD XAUUSD Whipsaws and Fake Out Signals on Bearish and Bullish Territory

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

MACD Indicator Whipsaw - XAUUSD Whipsaws

The MACD indicator gave a buy signal, when this buy signal was generated and MACD indicator line was still below the zero centerline mark. At this point the buy signal had not been confirmed & it resulted in to a fake out as displayed by the moving averages MAs which continued to move downwards.

A xauusd whipsaw signal is as a result of dramatic rise and fall in the 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 fake out moves are usually brought about because of some news event that can produce market noise.

Traders should have the ability to gauge a whipsaw and withstand the whipsaw; a whipsaw might result in to an upswing session and then a downswing session. To minimize the risk of trading whipsaw fakeouts, it is good to wait for confirmation of signals by waiting for MACD to cross above or below the zero center line mark.

Combining MACD Cross over with Center-Line Cross over to Prevent Whipsaws

Buy trade signal - When there's a crossover, followed by a steep rise in price and then a centerline cross-over the buy signal is confirmed.

Sell trade signal - When there's a crossover, followed by a steep decline in price & then a center line cross-over the sell trade signal is confirmed.

1. Buy Signal in Bearish Territory Whipsaw

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

In the example shown below, MACD indicator gives a buy signal even though it is in bearish territory, the MACD indicator then turns downwards & starts heading down again resulting in to a xauusd whipsaw. By waiting for center line crossover it is possible to avoid the fake out.

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

MACD XAUUSD Whipsaw - Buy Signal in Bearish Territory

2. Sell Signal in Bullish Territory Whipsaw

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

In the example illustrated below, the MACD indicator gives a sell trade signal even though it's in bullish territory, the MACD indicator then turns up & starts moving upward again resulting into a fake out. By waiting for center-line crossover it is possible to avoid the whipsaw fakeout. In the example shown below by combining this MACD indicator with the MA Crossover Strategy you would have avoided this whipsaw.

MACD XAUUSD Whipsaw - Sell Signal in Bullish Territory

To avoid fake outs completely when trading the market with this MACD Indicator it is best to use the Center-Line Crossover Signal as the Official Buy or Sell Signal of the MACD Indicator.

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MACD XAUUSD Whipsaws and Fake Out Signals on Bearish and Bullish Territory

Combining MACD Cross over with Center-Line Cross over to Prevent Whipsaws