How I Trade The MACD Divergence Strategy

10% Credit Spreads
3 min readFeb 14, 2024

--

Are you curious how you can use a simple indicator like MACD to generate profitable trade signals in any type of market? Today, I’m excited to share one of my favorite strategies for navigating the markets — the MACD Divergence Strategy. In this article, we’ll delve into how you can use the MACD indicator to avoid market crashes and make informed decisions on when to buy and sell. I’ll walk you through the process, highlighting common pitfalls to avoid and providing real-life examples of profitable trades. So, let’s jump right into it!

The $300 Payday Options Trading Strategy

The first step in implementing the MACD Divergence Strategy is to set up the MACD indicator on your preferred charting platform. Whether you’re using a free tool like TradingView or your broker’s platform, locate the “Indicators” section and add the “Moving Average Convergence Divergence” or MACD for short. Stick with the default settings for now; we’ll keep it simple and effective.

Understanding MACD Divergence

While many traders focus on the traditional buy and sell signals generated by the MACD when its lines cross, our strategy centers around a more nuanced approach — MACD Divergence. This occurs when the price of the stock and the MACD lines start moving in opposite directions.

For instance, during an uptrend in the stock’s price, we want to observe whether the MACD lines are exhibiting divergence by moving in the opposite direction. This divergence is a powerful indicator of a potential reversal in the market. Conversely, during a downtrend, we look for divergence that may signal an upcoming bounce.

Applying MACD Divergence in Real Market Scenarios

Let’s explore a real-world example to illustrate the effectiveness of MACD Divergence. In the tumultuous period of March 2020, when the market faced a significant downturn due to the COVID-19 pandemic, the MACD Divergence strategy could have provided crucial insights.

As the market reached all-time highs, we observed the stock’s price making higher highs while the MACD lines were trending lower — a classic divergence. This would have served as a warning sign, prompting us to consider exiting long positions and potentially entering short positions. Understanding these dynamics allows us to anticipate market reversals and make informed decisions.

Mastering MACD Divergence for Profitable Trading

In conclusion, the MACD Divergence Strategy is a valuable tool for traders seeking to enhance their decision-making process. By focusing on the divergence between the stock’s price and the MACD lines, especially during key market levels like highs or lows, you can gain a unique perspective on potential reversals.

Remember, while the MACD Divergence Strategy is powerful, it’s essential to apply it judiciously and, preferably, on ETFs for optimal results. Now that you’re equipped with this strategy, consider incorporating it into your trading toolkit.

If you want to trade options profitably with a 86%+ win rate and consistently generate monthly income, then join the 10% Credit Spreads program!

Thanks for reading 🙂
Austin Bouley
CEO & Chief Strategy Officer

--

--

10% Credit Spreads

I help people who work-full time or have a family make 10% a month using credit spreads! If you don't make money with my alerts and strategies, I refund you :)