Stochastic, MACD, Bollinger Bands Plus Day And Swing Traders

MACD divergence occurs when the price continues to rise at the time when MACD indicator

is declining and vice versa. To trade MACD divergence like a professional, one ought to grasp

at least twenty-four divergence trade facts.

 Image = "Stock chart that is depicting MACD divergence"

 MACD Divergence Fact One

Any time one is using a line chart instead of a bar or candlestick chart, one can readily recognize

that a line chart is almost an equal representation of its moving average period one.

Therefore, one can deduct that the moving average twelve is a more lagging (or heavier)

representation of the price-action.

MACD Divergence Fact Two

The standard MACD (12, 26, 9) depicts to a certain degree the moving average period twelve

(with the signal line) that is superimposed on the moving average twenty-six.

 Author = "George Beaulieu founder of stochastic-macd.com"

MACD Divergence Fact Three

One needs the first twelve closing price to form the first standard MACD closing point.

MACD Divergence Fact Four

To isolate a standard MACD divergence is to identify a discrepancy at the time one is comparing

the moving period twelve to moving average period one.

MACD Divergence Fact Five

In a normal condition (everything being equal) a rising moving average period twelve relates

to a rising moving average period one.  Therefore, there should be is a zero divergence in normal

conditions.

MACD Divergence Fact Six

In a changeable condition ( everything not always equal), the rise of the average twelve does not

automatically signifies the increase of the mean of one and vice versa.  In another word, MACD

12 may gain when the price is declining and vice versa.

MACD Divergence Fact Seven

A bullish or bearish divergence occurs in a shifting market condition.

MACD Divergence Fact Eight

Bullish and bearish divergence are warnings. They are as such instead of trading signals.

MACD Divergence Fact Nine

False MACD divergences are prevailing during market distortions or manipulations. Nevertheless,

the primary factor is excessive volatility in the financial markets.

MACD Divergence Fact Ten

Any time one identifies an MACD divergence, prudence requires to implement a multiple times frame

trading strategy.

MACD Divergence Fact Eleven

It is easier to enhance MACD divergence trading by filtering out false divergences with the Elliott

wave principle.

MACD Divergence Fact Twelve

Market indicator divergences are more reliable long term warnings to gauge the financials markets

and manage investment portfolio in comparison to MACD divergence.

MACD Divergence Fact Thirteen

When trading MACD divergence, it is indispensable to take into account

MACD's slope plus the current market pattern.

MACD Divergence Fact Fourteen

During a strong bullish phase, MACD is overstretched to the point where the indicator begins

to pull back to its equilibrium level. Though, MACD is declining the price continues to rise.

That phenomenon often leads to a fake bearish divergence.

MACD Divergence Fact Fifteen

During a strong bearish phase, MACD becomes overbought forcing the indicator to rally up to its

equilibrium level. Meanwhile, the price continues to fall.  This process often leads to a bogus bullish

divergence.

MACD Divergence Fact Sixteen

MACD divergences during the third Elliott wave are usually false divergences.

MACD Divergence Fact Seventeen

The price confirms valid MACD divergences with direct trading signals.

MACD Divergence Fact Eighteen

An invalid bullish divergence is a bearish trading setup or continuation.

MACD Divergence Fact Nineteen

A non-confirmed bearish divergence is a bullish trading setup, but also a bullish

continuation trade setup.

MACD Divergence Fact Twenty

MACD divergences at the end of the second Elliott wave are often great trading setups.

MACD Divergence Fact Twenty-One

One should always handle with prudence MACD divergences on or near the 138.2%

Fibonacci extensions level.  They can be either concrete or untrue divergences.

MACD Divergence Fact Twenty-Two

By combining a multiple times frame trading strategy with the MACD divergence, one will filter

out false divergences.

MACD Divergence Fact Twenty-Three

Best MACD divergences commonly take place in the vicinity of key support and resistance levels.

It is logical that one relates bullish divergence to a key support level and vice versa.

MACD Divergence Fact Twenty-Four

The first higher low after a bullish divergence is quite often a low-risk bullish trade setup. Conversely,

 the first lower high is also a high probability bearish trade setup after a bearish divergence.

Conclusion

Clearly, there is no substitute to the price-action when one is trading MACD divergence.

Though MACD divergence pre-warn about possible reversal price levels, one ought to align those

warnings with direct trading signals (without infringing other fundamental market principles).

Surely, the twenty-four MACD divergence facts will help day or swing traders have an insider

understanding and filter out false MACD divergence trading signals.