As it is known, when trading in the Forex currency market the evidence of the MACD indicator displayed on the monitors in the form of a line is used. When this line and the price of the underlying asset (also displayed as a line) begin to diverge, this process is called divergence. Using an investment strategy based on MACD divergence, which has a universal nature, traders can secure a very solid income from the stock exchange game. The universality of the MACD divergence lies in the fact that the practice has proved its sufficient success when used in trade processes for both long and short time intervals, and without usage limiting the type of financial instruments.
- What are the advantages of divergence
- With what the trader can use MACD-divergence
- Deferred orders with MACD divergence
What are the advantages of divergence
The advantages of this strategy are the possibility of identifying with it a satisfactory degree of efficiency of the moments of rollback and reversal of trends. The disadvantage is that it is by definition incapable of specifying the exact entry point to the Forex market.
With what the trader can use MACD-divergence
To conduct the stock exchange game on the above strategy is recommended in conjunction with the application of other strategies with their other types being leading and the MACD divergence strategy is ancillary. Why? Because if the trade is conducted over long time intervals, then signals about changes in the exchange situation are not transmitted much more often than in the case of short-term trading and these signals can only confirm the signals received when applying the main strategies.
When using the MACD-divergence strategy, tools such as Stop Loss and Take Profit should be set at support and resistance levels, respectively. Opening the so-called “long position”, you should wait for the appearance of such an indicator MACD indicator, which would show the beginning of the trend ascending, while in fact the value of the currency being traded will be in a downward trend. When so-called “short position” is open, on the contrary, the MACD indicator should show that the trend starts descending, whereas in fact the currency is in an uptrend.
Deferred orders with MACD divergence
The trader uses the so-called deferred orders when trading on long positions, Stop-loss is advisable to use at the level of support that will be closest. If pending orders are used when trading at short positions, Stop Loss, respectively, is recommended to set by the value of the nearest resistance level.
Take profit at trading on long positions to the trader is recommended to set in accordance with the following resistance level, when trading on short positions – according to the following level of support.