What's MACD Divergence?

MACD Divergence Trading is one of the strategy used by online stock traders to analyze chart price movement. MACD Divergence involves looking at a chart & one more technical indicator - MACD indicator. For our this stock trade divergence tutorials we shall use the MACD indicator - MACD Divergence.

To spot this MACD divergence setup find 2 chart points at which stock price makes a new swing high or a new swing low but the MACD indicator doesn't do the same, thus indicating that there's a divergence between the price & momentum.

MACD Divergence Example:

In the chart below we spot two chart points, chart point Marked A & chart point Marked B (swing highs)

Then using MACD indicator we check highs made by MACD indices indicator, these are highs that are directly below the Chart points marked A & B.

We then draw one line on the chart & another line on the MACD indicator.

MACD Divergence Meaning - Bullish Divergence MACD - Bearish Trading Divergence MACD - MACD Trading Divergence Guide

How to trade MACD divergence

In order to trade MACD divergence setup we look for the following set-ups:

HH - Higher High - two highs but the last one is higher

LH - Lower High - two highs but the last one is lower

HL - Higher Low - two lows but the last one is higher

LL - Lower Low - two lows but the last one is lower

First let us look at examples of these trade divergence terms

MACD Divergence Meaning - Stock MACD Divergence Guide

MACD Divergence Definition - MACD Divergence Guide - MACD Divergence Strategy Course - MACD Divergence Trading Tutorial Guide

There are two types of indices MACD divergence setups:

1. MACD Classic Divergence
2. MACD Hidden Divergence