The basis of the MACD divergence strategy is the fact that the MACD is a leading indicator which sometimes points to change in trend of price action, before the price action itself moves in divergence direction of the MACD indicator. There are two components of this strategy: Choose any ongoing Forex competition to test the strategy safely on Strategy account. The lines of forex MACD indicator typically form peaks and troughs, which usually are in tandem with the peaks and troughs of the price action. The opportunity exists because the price action will eventually correct in divergence direction of the MACD indicator. The Forex trader therefore aims to spot the point at which this divergence occurs, sets up the trade and then waits for the price action to deliver the trade into profit territory. So how can the MACD divergence be spotted? The divergence occurs when the price action forms higher highs when the Divergence forms lower highs. The way to trade this divergence is to short the currency pair on which this has occurred. The divergence short trade must be setup using clear cut technical parameters; it is not a random event. This is the only way to guarantee good entries that will not lead to drawdowns, or cause the trader to sacrifice pips that could have been banked in profits. These technical parameters are as follows:. Here is a classical divergence trade on the 1 hour chart of the NZDJPY. The divergence is spotted as shown. Once divergence has occurred, divergence next thing to look out for is the entry trigger for the trade. Notice that after the divergence has occurred, forex candles formed which were in a sideways trend. A trendline can therefore be drawn across the lows of these candles to show a trendline. The break forex this trend line is what will constitute the trigger for the trade as shown below:. This broken trend line will now form the basis for divergence the stop loss, which should be set a few pips above the high of the breakout candle. Traders are advised to let the trade run. Usually the MACD will give the signal of when the trade will turn. Divergence the bars of the MACD start to head towards positive territory, then it is time to exit the trade. For divergence MACD convergence tradewe look for a situation forex the forex action is forming lower lows while strategy MACD indicator is forming higher lows. The trader therefore aims strategy spot the point at which the convergence occurs, sets up the trade and then waits for the price action to deliver the trade into profit territory. So how can the MACD convergence be spotted? The strategy occurs strategy the price action forms forex highs when the MACD forms lower highs. The way to trade this convergence is to go long on the currency pair on which this has using clear cut technical parameters. An example of the MACD convergencewhich is traded as a long entry, is shown below:. A very strategy pattern of convergence is seen here, with the price action making lower lows and the MACD making higher lows. Having detected a convergence trade opportunity, the next stage is to search for the entry trigger. In divergence case, the entry trigger is divergence morning star pattern which is shown in this enlarged pattern strategy. Enlarged snapshot of the Morning Star candlestick pattern. Another tool that could be deployed in confirmation of this entry is the blue colour of the MACD bars. The colour-coding of this customized MACD indicator is to enable earlier detection of the MACD sentiment. The Stop Loss for this trade is set below forex low of the candlestick pattern, and the Take Profit is set to be flexible. Closing a profitable trade will depend on when the sentiment in the market changes as evidenced by the Strategy turning from positive to negative. ForexCup is the project of Forex contests which are provided with prizes and bonuses from FXOpen. Please, be aware that trading on the Forex market involves substantial risks, including complete possible loss of funds and other losses and is not suitable forex all members. Clients should make forex independent judgment as to whether trading is appropriate for them. Sign up Log in. Home News Announcements Results Interviews Project News Tournaments Ratings Affiliate Program Help How To Participate Competition Rules F. MACD Convergence-Divergence Forex Strategy. My FXOpen Sign up Trading Terms. MT4 FAQ How to Participate? Partnership Online Support Strategy Rules. Bonuses Forum FXOpen Blog. Privacy Terms of Business AML.
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