MACD Metals Whipsaws and Fake Out Signals on Bearish & Bullish Territory
Since the MACD indicator is a leading indicator which sometimes gives whipsaws, we shall look at an example of a metals trading whipsaw generated by this MACD indicator, so as to illustrate why it's always good to wait for a confirmation metals trade signal.
MACD Metals Technical Indicator Whipsaw - Metals Trading Whipsaws
The MACD indicator gave a buy metals trading signal, when this buy metals signal was generated and the MACD indicator line was still below the zero center line mark. At this point the buy metals signal had not been confirmed and it resulted into a metals whipsaw as illustrated by the moving averages which continued to move downwards.
A metals trading whipsaw signal is as a result of dramatic rise and fall in the metals 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 metals trading whipsaw and withstand the whipsaw; a metals trading whipsaw might result into an upswing session and then a downswing session. To minimize the risk of metals trading whipsaws, it's good to wait for confirmation of metals signals by waiting for MACD to cross above or below the zero center-line mark.
Combining MACD Crossover with Center-Line Crossover to Prevent Metal Trading Whipsaws
Buy metals trading signal - When there is a crossover, followed by a steep rise in metals price and then a center-line crossover the buy metals signal is confirmed.
Sell metals trading signal - When there is a crossover, followed by a steep decline in metals price and then a center-line crossover the sell metals signal is confirmed.
1. Buy Metals Signal in Bearish Territory Whipsaw
When a buy metals signal is generated in a bearish territory, it might result into a metals whipsaw especially if it isn't followed soon after by a MACD center line cross-over.
In the metal trading example illustrated and explained below, MACD indicator gives a buy metals signal even though it is in bearish territory, the MACD indicator then turns downwards and starts moving down again resulting into a metals whipsaw. By waiting for center line cross-over it is possible to avoid the whipsaw.
However, in this case there was a brief center line crossing: this metals trading 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 metals indicator. In the metal trading example illustrated and explained below MACD is combined with the moving average metals indicators technical analysis.
MACD Metals Whipsaw - Buy Metals Signal in Bearish Territory
2. Sell Metals Signal in Bullish Territory Whipsaw
When a sell metals signal is generated in a bullish territory, it might result into a metals whipsaw especially if it isn't followed soon by a MACD center-line cross-over.
In the metal trading example illustrated and explained below, the MACD indicator gives a sell metals signal even though it is in bullish territory, the MACD indicator then turns up and starts moving upwards again resulting into a metals trading whipsaw. By waiting for center-line crossover it is possible to avoid the metals trading whipsaw. In the metal trading example illustrated and explained below by combining this MACD indicator with the Moving Average Crossover Metals Strategy you would have avoided this whipsaw.
MACD Metals Whipsaw - Sell Metals Signal in Bullish Territory
To avoid metals trading whipsaws completely when trading the metal market with this MACD Metals Technical Indicator it is best to use the Center-line Crossover Signal as the Official Buy or Sell Metals Trading Signal of The MACD Technical Indicator.
