MACD CFD Whipsaws and Fake Out Signals on Bearish and Bullish Territory

Since the MACD indicator is a leading indicator which sometimes gives whipsaws, we shall look at an example of a cfd whipsaw generated by this MACD indicator, so as to illustrate why it's always good to wait for a confirmation cfds trade signal.

MACD CFD Technical Indicator Whipsaw - CFD Whipsaws

The MACD indicator gave a buy cfd signal, when this buy cfd signal was generated and the MACD indicator line was still below the zero center line mark. At this point the buy cfd signal had not been confirmed and it resulted into a cfd whipsaw as illustrated by the moving averages which continued to move downwards.

A cfd whipsaw signal is as a result of dramatic rise and fall in the cfds price in a short time and in such a manner that skews the data used in calculating the moving averages that draw the MACD indicator data. These types of whipsaw moves are usually brought about because of some news event that can produce market noise.

Traders should have the ability to gauge a cfd whipsaw and withstand the whipsaw; a cfd whipsaw might result into an upswing session and then a downswing session. To minimize the risk of trading cfd whipsaws, it's good to wait for confirmation of cfd signals by waiting for MACD to cross above or below the zero center-line mark.

Combining MACD Crossover with Center-Line Crossover to Prevent CFD Whipsaws

Buy cfds trade signal - When there is a crossover, followed by a steep rise in cfds price and then a center-line crossover the buy cfd signal is confirmed.

Sell cfds trade signal - When there is a crossover, followed by a steep decline in cfds price and then a center-line crossover the sell cfd signal is confirmed.

• 1. Buy CFD Signal in Bearish Territory Whipsaw

When a buy cfd signal is generated in a bearish territory, it might result into a cfd whip saw especially if it is not followed soon by a MACD center line crossover.

In the cfd example shown below, MACD indicator gives a buy cfd signal even though it is in bearish territory, the MACD indicator then turns downwards and starts moving down again resulting into a cfd whipsaw. By waiting for center line crossover it is possible to avoid the whipsaw.

However, in this case there was a brief center line crossing: this cfd whipsaw would have been hard to trade using this MACD indicator alone, that is why it is good to combine the use of MACD indicator with another cfd technical indicator. In the cfd example shown below MACD is combined with the moving average cfd indicators technical analysis.

MACD CFD Whipsaw - Buy CFD Signal in Bearish Territory

• 2. Sell CFD Signal in Bullish Territory Whipsaw

When a sell cfd signal is generated in a bullish territory, it might result into a cfd whip saw especially if it is not followed soon by a MACD center-line crossover.

In the cfd example shown below, the MACD indicator gives a sell cfd signal even though it is in bullish territory, the MACD indicator then turns up and starts moving upwards again resulting into a cfd whipsaw. By waiting for center-line crossover it is possible to avoid the cfd whipsaw. In the cfd example shown below by combining this MACD indicator with the Moving Average Crossover CFD Strategy you would have avoided this whipsaw.

MACD CFD Whipsaw - Sell CFD Signal in Bullish Territory

To avoid cfd whipsaws completely when trading the cfd market with this MACD CFD Technical Indicator it is best to use the Center-line Crossover Signal as the Official Buy or Sell CFD Signal of The MACD Indicator.