MACD Divergence Strategy - Profitable Forex Strategy

MACD divergence strategy is a tool used in the forex trading world that can reveal price momentum and help with interpretting price trend and direction. Is is a powerful indicator of buying and selling signal. So what is the MACD divergence strategy?

As explained in our MACD discussion, the common defualt settings for MACD are 12,26,9.Divergence occurs when price makes a new high or a new low, but MACD fails to show correct data creating a divergence between price and momentum. Positive divergence occurs when price drops in the price chart, but the MACD values show an increase. This indicates that a stock or currency is going to start climbing. Negative divergence occurs as the price in the price chart increases as the MACD values decreases. This indicated that the stock or currency that you are watching is about to decline.

The graph below shows negative divergence at points A and B with price increasing at point B while MACD decreases at point A.

So as you can see using MACD divergence can really be a useful tool in helping you determine on when to buy and when to sell. It should be noted that MACD, like any indicator, is not 100% accuarate all the time. Sometimes your can sell earlier than the highest price has been reached, or buy before the lowest price has been reached.

OVerall, MACD divergance strategy is a great tool is assisting you in your forex and stock market exchanges.

If you are still having trouble understanding MACD divergence, here is a great video that helped me understand MACD and the topic of divergence.

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