Learn How to Trade MACD Divergence

Many traders already use the MACD indicator in their everyday trading activities. Traders will usually trade the cross over of the exponential moving averages. They can make some macd good profit if they have a good trading plan and perform good money management.

However there are times of course when the MACD will lead traders into times of profit loss, traders will inevitably become frustrated and start searching for other technical indicators which do what MACD does not seem to be able to do for them. And this cycle tends to occur indefinitely for a lot of traders until they finally just quit. Or lose all their money.

But with MACD you can also look for possible divergence of the MACD and price of the financial security. You can see the MACD histogram and the exponential moving averages weaken and subside, while the financial security price continues to climb. Or this can be exactly the opposite, with the result of the security either going up and down in relation.

To take full advantage of this divergence you can draw a line either mentally or on a chart itself and place a line across the top of the moving averages of the MACD and if this line is pointed down while the stock or other financial security prices are climbing, this is an indication that the value of what is being charted is about to drop. This functions the other way around as well.

This helps a trader to stop before placing a buy or sell if they take into account what the divergence of the MACD is showing them. It gives you an opportunity to hold out and wait for a signal in the opposite direction of the current trend, because that is most likely where the money is going to be had.

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