MACD Indices Classic Bullish & Bearish Divergence

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

1. It is a low risk method to sell near the market top or buy near the market bottom, 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 trade

There are two types of Stock Classic Divergence:

1. Classic Bullish Divergence
2. Classic Bearish Divergence

Classic Bullish Divergence in Stock Indices Trading

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

MACD Classic Bullish Divergence - MACD Divergence Trade Strategy

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

Classic bearish divergence in Stock Indices Trading

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

MACD Classic Bearish Divergence in Stock Indices Trading - MACD Divergence Trade Strategy

Classic bearish divergence warns of a possible change in the market 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 MACD indicator. This indicates underlying weakness of the upwards market trend.