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

Since the MACD is a leading trading indicator that sometimes generates fake outs, we shall look at an example of a whipsaw fakeout generated by this MACD indicator, so as to indicate why it's always good to chill and wait for a confirmation signal.

MACD Indicator Whipsaw - XAUUSD Whipsaws

The MACD gave a buy signal, when this buy signal was generated and MACD line was still below the zero center-line mark. At this point the buy signal had not been confirmed & it resulted in to a fake out such 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 data. These types of fake out moves are usually brought about because of some news event/announcement which 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 whipsaw fakeouts, it is good to wait for confirmation of signals by waiting for MACD to cross above/below the zero centerline mark.

Combining MACD Cross over with Center-Line Cross over to Prevent Whipsaw Fake-outs

Buy 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 Trading Signal in Bearish Territory Whipsaw

When a buy signal is generated/derived in 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 gives and generates a buy signal even though it is in bearish territory, the MACD then turns downwards & starts heading down again resulting in to a xauusd whipsaw. By waiting for centerline crossover it's possible to avoid the fake out.

However, in this case there was a brief center-line crossing: this whipsaw fakeout would have been difficult to trade using MACD alone, that's why it is good to combine the use of MACD indicator with another indicator. In the example shown below MACD is combined with the moving average indicators analysis.

MACD XAUUSD Whipsaw - Buy Trading Signal in Bearish Territory

2. Sell Signal in Bullish Territory Whipsaw

When a sell trade signal is derived/generated in 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 shown below, the MACD gives and generates a sell trade signal even though it's in bullish territory, the MACD then turns up & starts moving upward again resulting into a fake out. By waiting for centerline crossover it's possible to avoid the whipsaw fakeout. In the example shown below by combining this MACD 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 markets 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 Whipsaw Fake-outs