Trade Stock Indices

MACD Index Classic Bullish and Bearish Divergence

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

1. Executing a sell order near the peak of the market or a buy order near the trough represents a strategy with limited risk, as the potential loss on your positions is minimal compared to the potential gain.

2. Its instrumental value lies in forecasting the most advantageous price level for concluding an active trade position.

There are 2 types of Indices Classic Divergence:

  1. Classic Bullish Divergence Setup
  2. Classic Bearish Divergence

Classic Bullish Divergence in Index Trading

When the oscillator indicator is making/forming higher lows (HL), but the price is making/forming lower lows (LL), this is known as the traditional bullish divergence trading pattern in the Index.

MACD Index Classic Bullish & Bearish Divergence

MACD Classic Bullish Divergence - MACD Divergence Trading Strategy

Classic bullish divergence trading setup in Index warns of a possible change in the trend from downward to upward. This is because even though the market price went lower the volume of the sellers(bears) who pushed the price lower was less like shown by the MACD indicator. This shows the underlying weakness of the downwards trend.

Classic bearish divergence in Index Trading

Classic bearish divergence in stock indexes shows when price hits a higher high, but the oscillator drops to a lower high.

MACD Index Classic Bullish & Bearish Divergence

MACD Bearish Divergence in Indexes - Strategy for Divergence Trades.

Classic bearish divergence is a trading pattern that signals a potential shift in the market trend from upward to downward. This occurs when the price rises, but the buying volume that propels it forward decreases, as indicated by the MACD. This phenomenon highlights a fundamental weakness in the upward trend.

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