MACD stands for Moving Average Convergence Divergence, a trend following momentum indicator that shows the relationship between two moving averages of price. And is considered one of the most reliable signs of a weakening of the current trend.
🔹 Bullish divergence appears when price continuously makes lower lows but the MACD line makes higher lows showing selling pressure is exhausted and buyers are silently accumulating strength
🔸 Conversely bearish divergence occurs when price makes a higher high but MACD makes a lower high warning that bullish momentum is just a shell while inside capital has started to withdraw
🔹 The safest entry point is not immediately upon seeing divergence but when the MACD line crosses up the Signal Line or when price breaks the trendline of the old trend
🔸 Combine MACD divergence with reversal candlestick patterns at key support resistance zones to filter out noise signals and maximize win probability
Do you regularly use MACD divergence to catch tops and bottoms or just use it as a supplementary reference tool?
This article is for reference only, this is not investment advice. Please read and consider carefully before making a decision.