Friday, 29 April 2016

Trading Strategy based on MACD Divergence
   The divergence strategy is one of the most important strategies, which can be utilized to trade profitably in the Stock Market. In the Divergence based technique, the divergence between one of the momentum indicators and the price is observed and the trend reversals are anticipated.  

   Both RSI and MACD can be used as the indicators for the divergence technique. RSI stands for Relative Strength Index and MACD stands for Moving average Convergence and Divergence.

   In case of divergence technique, a divergence between the price and the indicator is searched for. The divergence can be bullish divergence or bearish divergence. The bullish divergence indicates the start of an uptrend. Similarly the bearish divergence indicates the start of bearish trend.

   The above strategy can be used to generate accurate stock market tips. MACD is extensively used for the divergence analysis. The histogram of the MACD is drawn and the lines indicating the divergence between the peaks of the histogram are drawn.

   The indicators like CCI are also extensively used in Divergence analysis. The divergences are also of types, hidden divergence and absolute divergence. While using the divergence it should be clear that the success rate of the divergence trading is between 70 to 80 Percent.

    Not all the trades are profitable, but if the trader decides a favorable risk reward ratio, it will lead to the overall success of the traders. One can decide the Stop Loss of the trades little below or above the previous peak.

   The above strategy is extensively used by the Technical analysts and one can take help of reputed advisory firm like Money Classic Research which provides complete support and advices over the type of strategies discussed above. Money classic Research is an advisory firm which is reputed and also ISO certified. They provide accurate equity tips with proper stop loss levels.

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