MACD Indices Classic Bullish & Bearish Divergence
MACD Indices Classic divergence setup is used as a possible signal for a trend reversal. MACD classic divergence is used when looking for an area where the price could reverse and start going in the opposite direction. For this reason MACD classic divergence setup is used as a low risk entry method & also as an accurate to exit of a trade.
1. It's a low risk strategy to open sell near the market top or buy at near the market bottom, this makes the risk on your positions are small relative to the potential reward.
2. It is used to predict the ideal optimum point/level at which to exit a trade
There are two types of Stock Index Classic Divergence:
- Classic Bullish Divergence
- Classic Bearish Divergence Setup
Classic Bullish Divergence in Indices Trade
Classic bullish divergence in Index occurs when price is making lower lows (LL), but the oscillator indicator is making higher lows (HL).
MACD Classic Bullish Divergence - MACD Divergence System
Classic bullish divergence in Indices warns of a possible change in the trend from downward to upward. This is because even though the price moved lower the volume of the sellers that moved the price lower was less as illustrated by the MACD indicator. This indicates underlying weakness of the downward market trend.
Classic bearish divergence in Index Trade
Classic bearish divergence in Index occurs when the price is making a higher high (HH), but the oscillator is lower high (LH).
MACD Classic Bearish Divergence in Index Trade - MACD Divergence System
Classic bearish divergence signals a possible shift in the market trend from up to down. This is because even though the price moved higher the volume of the buyers that moved the price higher was less such as illustrated by the MACD indicator. This indicates underlying weakness of the upward trend.
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