“Breaking the Rules of the MACD: How to Survive When It’s Broken

When trading in the markets, traders use technical analysis to help them identify potential trade opportunities. The Moving Average Convergence Divergence (MACD) is a widely used technical indicator to identify possible points of reversal. Unfortunately, sometimes the MACD can become broken and useless as an indicator. Being aware that a MACD is broken can be a major help to traders when forming a trading strategy. Being aware of the potential problems that can arise during trading helps traders to develop a plan for such a scenario. The main cause of a broken MACD is when the moving averages of the indicator become divergent. This happens when one of the moving average crashes to the ground and becomes flat. This can be very detrimental to a technical indicator as it is not capable of providing an accurate picture of the market’s momentum. In order to avoid a broken MACD, traders should regularly examine the indicator and make sure that the moving averages are still making good contact. If there is any sign that the indicator is becoming flat or divergent, traders should look to replace the indicator or take some other suitable action. If the MACD does become broken, the best course of action is to look for alternative means of analysis. This could refer to an alternative technical indicator, fundamental analysis, or other sources of market analysis. Having a backup plan in place in the event of a broken MACD will help traders stay on track with their trading plan. Trading is an inherently risky activity, and being aware of the potential for a broken MACD is essential to successful trading. Taking the time to plan for and take corrective action in the event of a broken MACD will help traders take greater control over their trading and decrease the risk of a wrong decision being made.