FXA Compression - Weekly and daily divergence and the spring analogy
What is Compression and how does this relate to MACD divergence?
Have you ever COMPRESSED a spring? Push it against the ceiling, what happens when you release it? Push it against the floor, what happens? Same thing, right? Now, if the ceiling were getting lower and you compress the spring, does it move the same distance as when the ceiling was higher? YES, but since the backdrop(ceiling) was already lower the 2nd time the spring actually went much lower than it would have, right? Replace the SPRING with PRICE and the CEILING or FLOOR with the MACD and you have the perfect analogy for MACD divergence.
Have you ever COMPRESSED a spring? Push it against the ceiling, what happens when you release it? Push it against the floor, what happens? Same thing, right? Now, if the ceiling were getting lower and you compress the spring, does it move the same distance as when the ceiling was higher? YES, but since the backdrop(ceiling) was already lower the 2nd time the spring actually went much lower than it would have, right? Replace the SPRING with PRICE and the CEILING or FLOOR with the MACD and you have the perfect analogy for MACD divergence.



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