How to trade MACD Divergence
When MACD line (on our screenshot it is a blue line) crosses Signal line (red dotted line) - we have a point (top or bottom) to evaluate. With two most recent MACD line tops or bottoms find corresponding tops/bottoms on the price chart. Connect MACD tops/bottoms and chart tops/bottoms. Evaluate the lines received, as shown on the larger screenshot (click on the small picture to enlarge).
When MACD line (on our screenshot it is a blue line) crosses Signal line (red dotted line) - we have a point (top or bottom) to evaluate. With two most recent MACD line tops or bottoms find corresponding tops/bottoms on the price chart. Connect MACD tops/bottoms and chart tops/bottoms. Evaluate the lines received, as shown on the larger screenshot (click on the small picture to enlarge).
With MACD divergence spotted Enter the market when MACD line crosses over its zero point. Another entry strategy is to find 2 most recent swings high or low on the chart and draw a tr trough them; and then set an Entry order on the breakout of that trend line.
MACD divergence trading method used not only to predict trend turning points, but also for trend confirmation. A current trend has high potentials to continue unchanged in case no divergence between MACD and price was established after most recent tops/bottoms evaluation.
MACD divergence trading method used not only to predict trend turning points, but also for trend confirmation. A current trend has high potentials to continue unchanged in case no divergence between MACD and price was established after most recent tops/bottoms evaluation.
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