Forex Questions and Answers - FXAnswer

In technical analysis, divergence is considered either positive or negative, both of which are signals of major shifts in the direction of the price. Positive divergence occurs when the price of a security makes a new low while the indicator starts to climb upward. Negative divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead closes lower than the previous high.

Investopedia explains Divergence

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Warren

1 year ago

MACD Bearish Signals

* Negative divergence
* Bearish moving average crossover


Note: Positive and negative divergences are probably the least common of the two signals, but are usually the most reliable. It is recommended to use MACD in conjunction with other technical analysis tools such as candlestick patterns to make a complete forex trading system.

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thegreeks

1 year ago

Difficulty: Moderately ChallengingInstructions
Step 1Watch for divergence. The most potent use for MACD is to spot divergences in price action. A divergence occurs when the trend in the MACD and actual price begin to move in opposite directions. For example, if a down-trending stock makes a new low in price, but while MACD does not reach new lows and actually moves upward, this is a positive divergence and suggests a buying opportunity. The opposite would be a negative divergence and suggests a chance to sell.

Step 2Spot centerline crossovers. The centerline, or zero-line, is the place where the difference between the fast and slow moving-average lines is nil. When the MACD lines move from negative to positive through the centerline, this is a bullish indication. A move from positive to negative suggests momentum has shifted and indicates continued weakness in price.

Step 3Confirm divergences with moving-average crossovers. A moving-average crossover is similar to a centerline crossover except that it occurs when the fast-moving line crosses over the slower-moving line. Because this can happen frequently, it is not considered a reliable indicator on its own. But, such crossovers are important in confirming positive and negative divergences. For example, a bullish moving average crossover occurring after MACD indicates a positive divergence is considered a reliable indication that a positive change in trend is about to occur.

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slim

1 year ago