MACD Gold Whipsaws and Fake Out Signals on Bearish & Bullish Territory

Since the MACD indicator is a leading indicator which sometimes gives and generates whipsaw fakeouts, we shall look at an example of a trading whipsaw generated by this MACD indicator, so as to display why it's always good to wait for a confirmation signal.

MACD Whipsaw - Gold Whipsaws

The MACD indicator gave a buy trade signal, when this buy signal was generated & MACD indicator line was still below the zero center-line mark. At this point the buy signal had not been confirmed & it resulted into a trading whipsaw such as shown/illustrated by the MAs which continued to move downwards.

A gold trading whipsaw fakeout signal is as a result of a dramatic rise or a dramatic fall in the price action movement within a short time and occuring in such a manner that skews the information data used when calculating the moving averages indicators that draw the MACD data. These types of whipsaw fakeout moves are mostly brought about due to some news event that can produce market noise.

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

Combining Together MACD Crossover with Center Line Crossover to Prevent Whipsaws

Buy signal - When there is a cross-over, followed by a steep rise in price and then a center-line cross over the buy signal is confirmed.

Sell trading signal - When there is a cross-over, followed by a steep decline in price & then a center-line cross over the sell signal gets confirmed.

1. Buy Trading Signal in Bearish Territory Region Whipsaw

When a buy signal is generated in bearish territory, it might result into a gold whip saw especially if it's not followed soon after by a MACD centerline crossover.

In the trading example shown and described below, MACD indicator generates a buy signal even though it's in bearish territory, the MACD indicator then turns downwards & starts moving down again resulting into a gold whipsaw. By waiting for center-line cross over it's possible to avoid the whipsaw.

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

MACD Gold Whipsaw - Buy Signal in Bearish Territory

2. Sell Trading Signal in Bullish Territory Region Whipsaw

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

In the example shown & described below, MACD indicator generates a sell trading signal even though it's in bullish territory, the MACD indicator then turns up and starts moving upwards again resulting into a whipsaw. By waiting for center line cross-over it's possible to avoid the trading whipsaw. In the example shown and explained below by combining this MACD indicator with the Moving Average Cross over Strategy you would have avoided this whipsaw.

MACD Gold Whipsaw - Sell Signal in Bullish Territory

To avoid gold whipsaws completely when trading the market with this MACD it's best to use the Center-Line Crossover Signal as the Official Buy or Sell Signal of MACD Indicator.

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MACD Gold Whipsaws and Fake Out Signals on Bearish & Bullish Territory

Combining Together MACD Crossover with Center Line Crossover to Prevent Whipsaws