Resolved Question
How can I identify the divergence using MACD?
Is it in the divergence from the histogram or divergence from the prices? Please help me identify the divergence using MACD. Thank you.
over 2 years ago
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Traders who use divergence trading use it as an indicator to spot tops and bottoms through the relationship between price action and an oscillator (such as RSI, Stochastic and MACD). The oscillator should be reflective of price action - if price action is making new highs, then the oscillator should be making new highs. If price is registering lower lows, then the oscillator should be doing the same. If it is not, then there is a divergence. For more information regarding divergence trading, I suggest you check the link I posted below.
over 2 years ago
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Answers (2)
Hi there! This is a good site from where you can have a better understanding about divergence. Happy Pippin'! http://www.trading-naked.com/Diverg...
over 2 years ago
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The MACD is an oscillator which uses the difference between moving averages to reflect the acceleration in downward or upward momentum. Divergence is tracked in pretty much the same way as in your usual RSI or stochastic oscillator... which means you check take note of the divergence from the prices. A bullish divergence occurs when the MACD is (a) making higher lows but the price is making lower lows, or (b) making lower lows but the price is making higher lows. A bearish divergence takes place when the MACD is (a) making higher highs but the price is showing lower highs, or (b) making lower highs with the price drawing higher highs. If you're wondering what the histogram is for, it's used to anticipate MACD crossovers - which can be bullish or bearish signals just like your usual MA or EMA crossovers.
over 2 years ago
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