MACD Divergence Indicator - use divergence like a pro
Divergence is one of the most powerful methods in technical analysis in forex. But finding a divergence on the graph alone is very difficult. MACD Divergence Indicator will help us in finding the divergence and automatically mark the arrows on the graph possible entry points. MACD Divergence Indicator v2.1 as any other indicator is better to use as part of a trading system, and not alone. MACD Divergence v2.1 versatile and can be used for any currency pairs and time frames.
Characteristics
- Platform: Metatrader4
- Currency pairs: Any pairs
- Trading Time: Around the clock
- Timeframe: Any
- Recommended broker: InstaForex, XM, RoboForex
How it works?
The MACD Divergence for MT4 is a powerful tool for traders, enabling them to detect divergences between price action and the MACD. Equipped with a volume histogram and 12 EMA and 25 EMA lines, it provides a robust foundation for analyzing trend strength, direction, and potential reversals.
The MACD volume histogram highlights the trend’s momentum and direction, while the 12 and 25 EMAs help identify potential reversal points. This indicator captures both regular and hidden divergences, making it a valuable asset for advanced traders seeking higher reward-to-risk opportunities. It excels at early recognition of trend reversals or continuations.
Spotting Divergences with the MACD Divergence Indicator
Divergences fall into two main categories: regular and hidden. Regular divergence signals a trend reversal, while hidden divergence indicates a trend continuation.
Regular Divergence:
- Bullish: The MACD forms a higher low, while the price makes lower lows
- Bearish: The MACD creates a lower high as the price makes higher highs
Hidden Divergence:
- Bullish: The MACD makes a lower low, while the price creates a higher low
- Bearish: The MACD forms a higher high, while the price makes a lower high
With this tool, traders can enter trades at ideal points with a strong edge, accurately anticipating market shifts.
This video shows the principle of divergence and its practical application in trading on the example of a common MACD:
MACD Divergence Indicator v2.1 is equipped with an sound sgnal. This makes it very convenient to use. You can also set up alerts to E-mail (off by default).
Trading with the MACD Divergence Indicator
A bullish regular divergence signals the end of a downtrend and the beginning of an uptrend, indicating a buy opportunity. Conversely, a bearish regular divergence marks the end of an uptrend and the start of a downtrend, signaling a sell.
A hidden bearish divergence, however, points to trend continuation, suggesting a long position in an ongoing uptrend. The EUR/USD H4 chart below demonstrates how to use this indicator to optimize trade entries and exits.
In the example from March 1 to 9, 2021, a bullish hidden divergence developed between price and the MACD Divergence Indicator, marked with red trendlines. The indicator suggested an impending uptrend, further confirmed by a bullish engulfing candle on March 9. A buy trade was validated when the 12 EMA crossed above the 25 EMA, with a stop loss set just below the recent swing low (1.1823). The trade was closed when the 12 EMA crossed below the 25 EMA, marking the trend’s conclusion.
From March 4 to 12, 2021, a regular bearish divergence appeared, marked with green trendlines. The indicator warned of a downtrend, which was confirmed by a doji formation on March 12, signaling bull exhaustion. A sell trade was confirmed as the 12 EMA crossed below the 25 EMA, with the stop loss set slightly above the recent swing high (1.2001). Partial profit could be taken near 1.1823, with the final position closed at around 1.1707.
Conclusion
The MACD Divergence Indicator for MT4 is a powerful tool for spotting divergences between price and MACD, providing reliable entry and exit signals. It can be used on its own or combined with other price action tools. For optimal results, use this indicator on H1, H4, and daily timeframes.
In the archives MACD_Divergence_Indicator.rar:
- macd divergence indicator v2.1.ex4
- macd_divergence.mq5
- MACD divergence.tpl
Free Download MACD Divergence Indicator
