MACD Stock Indices Classic Bullish and Bearish Divergence

MACD Stock Indices 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 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 Indices trade.

1. It is a low risk method to sell near the Stock Indices market top or buy near the Stock Indices market bottom, this makes the risk on your Stock Indices trades are very small relative to the potential reward.

2. It is used to predict the optimum point at which to exit a Stock Indices trade

There are two types of Stock Indices Classic Divergence:

1. Classic Bullish Divergence
2. Classic Bearish Divergence

Classic Bullish Divergence in Stock Indices Trading

Classic bullish divergence in Stock Indices trading occurs when price is making lower lows (LL), but the oscillator is making higher lows (HL).

MACD Classic Bullish Divergence - MACD Divergence Stock Index Trading Strategy

Classic bullish divergence in Stock Indices trading warns of a possible change in the Stock Indices 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 Stock Indices indicator. This indicates underlying weakness of the downward Stock Indices market trend.

Classic bearish divergence in Stock Indices Trading

Classic bearish divergence in Stock Indices trading occurs when price is making a higher high (HH), but the oscillator is lower high (LH).

MACD Classic Bearish Divergence in Stock Indices Trading - MACD Divergence Stock Indices Trading Strategy

Classic bearish divergence warns of a possible change in the Stock Indices market 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 MACD Stock Indices indicator. This indicates underlying weakness of the upward Stock Indices market trend.