Discussion in 'Index Futures' started by jrs3, Jan 9, 2004.
5 Min chart NQ
While the NQ may reverse, that's not a divergence. The histogram measures the distance between the two MACD lines. If the trend is sustained, the histogram will "decline" since the distance between the two lines remains constant.
Hum, I always thought when price rose and indicators fell that was a divergence.
sox all time hi was 1200+ we arent even half way there yet. is it possible?
Depends on the indicator. The histogram is an oscillator. Therefore, you can't expect reliable signals once the vehicle begins trending.
Note here, for example, that the MACD is "roping", and the histogram is fluctuating around zero, even though the NQ continues to rise. Therefore, you also have to look at S/R and volume, at the least. Otherwise, you'll end up repeatedly trying to trade counter-trend.
And, yes, trading reversals entails trading counter-trend. But you'll require signals other than just the histogram.
May provide a better picture.
the 'trend' can reverse at any moment, indicator signal or not
You don't have the histogram plotted, but you can see what I mean by "roping".
Which is the point I made in my first response. However, the subject is how and when the MACD histogram suggests a reversal based on what is perceived to be a divergence. Debating the value of indicators is irrelevant (see the other thread on holy grailles: http://www.elitetrader.com/vb/showthread.php?threadid=26776).
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