What is Divergence indicator?

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The Divergence indicator is a moving average based indicator. Thousands of forex traders are using this special indicator in their metatrader terminal. By using Divergence metatrader indicator you will be able to unleash your trading expertise in a significant level. Surely this will add an extra ease for your successful trading. The Divergence indicator is special because it brings together momentum and trend in one indicator. This unique blend of trend and momentum can be applied to daily, weekly or monthly charts. The standard setting for MACD is the difference between the 12 and 26-period EMAs. Chartists looking for more sensitivity may try a shorter short-term moving average and a longer long-term moving average. MACD(5,35,5) is more sensitive than MACD(12,26,9) and might be better suited for weekly charts. Chartists looking for less sensitivity may consider lengthening the moving averages. A less sensitive MACD will still oscillate above/below zero, but the centerline crossovers and signal line crossovers will be less frequent.

Divergence indicator for metatrader

The Divergence indicator is not particularly good for identifying overbought and oversold levels. Even though it is possible to identify levels that are historically overbought or oversold, the Divergence does not have any upper or lower limits to bind its movement. During sharp moves, the MACD can continue to over-extend beyond its historical extremes.

Finally, Divergence indicator(MACD) is calculated using the actual difference between two moving averages. This means MACD values are dependent on the price of the underlying security. The MACD values for a $20 stocks may range from -1.5 to 1.5, while the MACD values for a $100 may range from -10 to +10. It is not possible to compare MACD values for a group of securities with varying prices. If you want to compare momentum readings, you should use the Percentage Price Oscillator (PPO), instead of the MACD.

Divergence indicator is definitely the most complicated for a trader. Divergence occurs when an indicator and the price of an asset are heading in opposite directions. Negative divergence happens when the price of a security is in an uptrend and a major indicator – such as the moving average convergence divergence (MACD), price rate of change (ROC) or relative strength index (RSI) – heads downward. Conversely, positive divergence occurs when the price is in a downtrend but an indicator starts to rise. These are usually reliable signs that the price of an asset may be reversing. When using divergence to help make trading decisions, be aware that indicator divergence can occur over extended periods of time, so tools such as trendlines and support and resistance levels should also be used to help confirm the reversal.

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