Trade Stock Indices

MACD Classic Bullish & Bearish Divergence Trade Setup

MACD Classic divergence setup is known as a likely indication of a change in the trend. MACD classic divergence is used to locate a place where the price might change direction and start moving in the opposite way. Because of this, the MACD classic divergence setup is used as a safe way to start a trade, and also to end a trade correctly.

1. This strategy involves a low-risk approach by selling near anticipated market peaks or purchasing near anticipated market troughs, thereby ensuring the potential downside for your equity positions is minimal relative to the possible upside.

Secondarily, it serves the purpose of forecasting the optimal juncture for exiting an active trade position.

There are 2 categories of Classic Divergence:

  1. Index Classic Bullish Divergence
  2. Index Classic Bearish Divergence

Index Classic Bullish Divergence in Indices Trading

In indices trading, classic bullish divergence happens when price hits lower lows but the oscillator makes higher lows.

Applying Classic MACD Bullish Divergence Strategies to Index Trading

Conventional Bullish Divergence of the MACD within Stock Indices - A MACD Divergence Methodology

A classic bullish divergence on indexes hints at a trend shift from down to up. Prices fell, but seller volume dropped too, as the MACD shows. This points to cracks in the downtrend's strength.

Classic bearish divergence in Indices Trading

A classic bearish divergence in index trading occurs when the price achieves a higher high (HH), while the oscillator displays a lower high (LH).

MACD Classic Bearish Divergence in Indices

MACD Classic Bearish Divergence in Indices - Strategy Based on MACD Divergence

Classic bearish divergence hints that the market might turn from up to down. Even if prices climb, if the buying volume drops - like the MACD indicator shows - it usually means the uptrend is losing steam.

Additional Lessons and Subjects:

Stock Index Broker