Divergence MACD Classic Bullish and Bearish Setups
MACD Classic divergence is used as a possible sign for a trend reversal. Classic divergence is used when looking for an area where price could reverse and start going in the opposite direction. For this reason classic divergence is used as a low risk entry method and 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 Forex trade.
There are two types:
- Classic Bullish Divergence
- Classic Bearish Divergence
Classic Bullish Divergence
Classic bullish divergence occurs when price is making lower lows (LL), but the divergence macd indicator is making higher lows (HL).
Divergence MACD Classic Bullish
Classic bullish divergence 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 downward trend.
Classic bearish divergence
Classic bearish divergence occurs when price is making a higher high (HH), but the divergence macd indicator is lower high (LH).
Divergence MACD Classic Bearish
Classic bearish divergence warns of a possible change in the 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 Divergence MACD indicator. This indicates underlying weakness of the upward trend.
Divergence MACD Hidden Bullish and Bearish Setups
MACD Hidden divergence is used as a possible sign for a trend continuation.
This divergence trade setup occurs when price retraces to retest a previous high or low.
1. Hidden Bullish Divergence
2. Hidden Bearish Divergence
Hidden Bullish Divergence
Forms when price is making a higher low (HL), but the MACD oscillator is showing a lower low (LL).
Hidden bullish divergence occurs when there is a retracement in an uptrend.
Divergence MACD bullish
This divergence confirms that a retracement move is complete. This divergence indicates underlying strength of an uptrend.
Hidden Bearish Divergence
Forms when price is making a lower high (LH), but the MACD oscillator is showing a higher high (HH).
Hidden bearish divergence occurs when there is a retracement in an uptrend.
divergence MACD bearish
This divergence trade setup confirms that a retracement move is complete. This divergence indicates underlying strength of a downtrend.
