How to trade breakous using Macd divergence with stochastic
Macd divergence serves as am early potential signal that a loss of momentum and a potential price reversal may be in the making. You should look at the macd histogram and price action on the currency chart. Suppose you want to detect a trend reversal breakout,you can identify it through the macd divergence signals.During an uptrend when price makes a higher high,macd histogram makes a lower high.this is called Negative bearish divergence and signal of a potential reversal to the downside is in the making. The signal in an uptrend is alert when price makes a lower low and macd histogram makes a higher low.this is called positive/classical bullish divergence. Pls note that when you detect a trend reversal breakout through macd divergence,always use stochastic as comfimation of last resort. My trade method is this,i always look at 1hr chart for divergence and use 15min chart as entry point and exit my position when stochastic is at the peak or valley.Or i site a divergence on the 4hr chart,and use 1hr as an entry point.Target Profit:use your pivot lines to take profit.Exit rule:if you are holding a buy position,close your position when stochastic is at the peak or pivot is at R2 or R3.this is known as area of overbought.. while holding a position in a downtrend,exit your position when stochastic form a valley,or check your pivot if price is at S2 or S3 know as oversold region. Remember that a simple system brings in decent profit and you can make a living trading the macd divergence alongside stochastic.hope its help?
