MACD Stock Indices Trading Classic Bullish and Bearish Divergence

MACD Stock Indices Trading Classic divergence is used as a possible sign for a stock indices trend reversal. MACD classic divergence is used when looking for an area where stock index price could reverse and start going in the opposite stock indices trend direction. For this reason MACD classic divergence is used as a low risk entry method and also as an accurate way of exit out of a stock indices trade.

1. It is a low risk method to sell near the stock indices market top or buy near the stock indices market bottom, this makes the risk on your stock index trades are very small relative to the potential reward.

2. It is used to predict the optimum point at which to exit a Indices trade.

There are two different types of Stock Indices Trading Classic Divergence:

1. Stock Indices Classic Bullish Divergence
2. Stock Indices Classic Bearish Divergence

Stock Indices Classic Bullish Divergence in Stock Indices

Classic bullish divergence in stock indices occurs when stock index price is making lower lows (LL), but the oscillator is making higher lows (HL).

MACD Stock Indices Classic Bullish Divergence in Stock Index - MACD Divergence Stock Indices Strategy

Classic bullish divergence in stock indices warns of a possible change in the stock indices trend from down to up. This is because even though the stock index price went lower the volume of sellers that pushed the stock index price lower was less as illustrated by the MACD stock indices indicator. This indicates underlying weakness of the downward stock index trend.

Classic bearish divergence in Stock Indices

Classic bearish divergence in stock indices occurs when stock index price is making a higher high (HH), but the oscillator is lower high (LH).

MACD Stock Indices Classic Bearish Divergence in Stock Index - MACD Divergence Stock Indices Strategy

Classic bearish divergence warns of a possible change in the stock indices market stock indices trend from up to down. This is because even though the stock index price went higher the volume of buyers that pushed the stock index price higher was less as illustrated by the MACD stock indices indicator. This indicates underlying weakness of the upward stock index trend.