You can download this MACD Divergence Trading System 15 page PDF with live trade examples FREE. This MACD Divergence Trading System is a practical trading system that is based on trading the divergence patterns with MACD as the main oscillator. Divergences are considered to be very strong leading trend reversal signals. There are not many leading indicators. Most of the indicators that you use are lagging. For example, moving averages are lagging indicators. They lag behind the price action. When the price move is over, the moving average is going to inform you of that thing. Most of the indicators are based on these moving averages so you will also find them to be lagging in nature. But MACD (Moving Average Convergence Divergence) indicator even though it is based on the difference between two moving averages is considered to be a sort of a leading indicator and is used extensively by many pro traders.
The difference between the two moving averages are also plotted as a histogram in the MACD chart. The most interesting development that happens is when you use this oscillator in a rather unconventional manner when you look for the divergence pattern. A divergence pattern develops when the price action makes a new higher high while the oscillator makes a new lower high or when the price action makes a new lower low and the price action makes a new higher low. Both are considered to be regular divergence trend reversal patterns. The first is an instance of a regular bearish divergence pattern developing which is a signal for an uptrend turning into a downtrend. And the second is an instance of a regular bullish divergence pattern which is signaling a downtrend turning into an uptrend.
When you go through this MACD Divergence Trading System 15 page PDF, you will find the explanation for most of the above concepts. First you will be introduced to the MACD indicator then you will be introduced to what is a divergence and how you should locate a divergence on the MACD histogram. This system can be used on any timeframe and any currency pairs. The duration of the trade will depend on the timeframe that you choose. For example on the 1 hour timeframe, a trade might continue for one to two days. On the 4 hour timeframe, a trade might continue for few more days.
Once you spot a divergence pattern developing on the MACD oscillator, you will then use the Stochastic oscillator to make the entry decision. In case of a bullish divergence pattern, you will enter when the Stochastic moves below 20 and then moves back above 20. In the same manner in case of a bearish divergence pattern, you will enter when the Stochastic moves above 80 and then back below 80. The entry and the stop loss placement rules have been explained in the PDF. You are also told in the PDF how to take profit in case of just a retracement and in case of a total trend reversal. You also get detailed explanation of a live trade example off 1 hour GBP/USD chart that made 446 pips in just 2 days. The stop loss was just 50 pips. If you calculate the reward to risk ratio of this trade, it comes out to be something like 5:1 which is very good.
The good thing about trading with these divergence patterns on the H1, H4 and D1 timeframes is that you don’t need to monitor the trade constantly. You can find trades with very good reward to risk ratios like that above. You get ample of time to plan each trade. So don’t miss downloading this FREE MACD Trend Trading System that made 446 pips in just 2 days. Go through the PDF, everything has been explained in detail.