MACD Stock Indices 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 index trade.
1. It is a low risk method to sell near the stock indices market tops or buy near the stock indices market bottoms, 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:
- Stock Indices Classic Bullish Divergence
- Stock Indices Classic Bearish Divergence
Stock Indices Classic Bullish Divergence in Stock Indices
Classic bullish divergence in stock indices occurs when price is making lower lows ( LL ), but the oscillator indicator is forming 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 who pushed the stock index price lower was less as illustrated by the MACD indicator. This indicates underlying weakness of the downwards stock index trend.
Classic bearish divergence in Stock Indices
Classic bearish divergence in stock indices occurs when price is making a higher high ( HH ), but the oscillator indicator 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 indicator. This indicates underlying weakness of the upwards trend.
