Tuesday, October 4, 2011
Regular and Hidden Divergence Trading
5:31 PM | 
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What is Divergence Trading and What if there is a way of trading with a low risk to sell or buy near the top that are near the bottom of a trend? So what if you are already in a position to buy and you can know the right time to exit the market? What if you believe in the currency pair will continue to fall but would like to open sell with a better price or with entries that are less risky?
Probably a good idea to use a known way with Divergence Trading. Short said the difference can be seen by comparing the actions of a price and movement on the indicator. Do not care about the indicators you are using. Where you can use the RSI, MACD, Stochastic, CCI and others.
In using the Divergence Trading can be very useful in finding a weakening trend or a reversal of momentum. Even sometimes you can use it as a signal for the continuation of a trend. Divergence trading there are two types, namely Regular and Hidden Divergence Divergence in which both of these would I strip for you all below.
1. Regular Divergence
Regular Divergence is used as a sign of the possibility of a reversal of a trend. If the movement was headed for a lower price (lower low / LL), but the oscillator formed a higher low (higher low / HL), is regarded as a Regular Bullish Divergence. This usually happens at the end of a downtrend. If the oscillator fails to make a new lower low, it is likely that prices will rise. Here is a picture which is going on Regular Bullish Divergence.
If the movement of a high price is being formed which move higher (higher high / HH), and oscillator forming a lower high (lower high / LH), then the movement is called with Regular Bearish Divergence. Regular bearish divergence occurs when a trend is showing a rising price movement. in the figure below, we will see prices reverse direction after forming the higher high with lower high oscillator form.
As you can see in the picture above, where regular divergence is best used when trying to pick tops and bottom. Where you are looking for an area where prices will stop and so was the opposite.
Now you already know about Regular Divergence, easy and very simple is not on the Regular Divergence.
2. Hidden Divergence
Divergence occurs not only as a potential reversal of a trend, they can also be used as a sign for the continuation of a trend. You need to always remember, the trend is your friend, so whenever you can get a signal that the trend will continue, then it is good for you.
Hidden bullish divergence occurs when price action formed a higher low (Higher Low / HL), but the oscillator to form a lower low (Lower low / LL). It can be seen as a pairs are in a rising trend. After forming a low price that is higher and see the oscillator to form a lower low. Movement can you see in the picture below.
Finally, we have hidden bearish divergence. This happens when the price of forming a lower high (Lower High / LH), but the oscillator formed a higher high (Higher high / HH). this occurs when decline trend.
Hopefully this explanation will help you in understanding Divergence Trading and can apply it at the time of your trading.
Probably a good idea to use a known way with Divergence Trading. Short said the difference can be seen by comparing the actions of a price and movement on the indicator. Do not care about the indicators you are using. Where you can use the RSI, MACD, Stochastic, CCI and others.
In using the Divergence Trading can be very useful in finding a weakening trend or a reversal of momentum. Even sometimes you can use it as a signal for the continuation of a trend. Divergence trading there are two types, namely Regular and Hidden Divergence Divergence in which both of these would I strip for you all below.
1. Regular Divergence
Regular Divergence is used as a sign of the possibility of a reversal of a trend. If the movement was headed for a lower price (lower low / LL), but the oscillator formed a higher low (higher low / HL), is regarded as a Regular Bullish Divergence. This usually happens at the end of a downtrend. If the oscillator fails to make a new lower low, it is likely that prices will rise. Here is a picture which is going on Regular Bullish Divergence.
If the movement of a high price is being formed which move higher (higher high / HH), and oscillator forming a lower high (lower high / LH), then the movement is called with Regular Bearish Divergence. Regular bearish divergence occurs when a trend is showing a rising price movement. in the figure below, we will see prices reverse direction after forming the higher high with lower high oscillator form.
As you can see in the picture above, where regular divergence is best used when trying to pick tops and bottom. Where you are looking for an area where prices will stop and so was the opposite.
Now you already know about Regular Divergence, easy and very simple is not on the Regular Divergence.
2. Hidden Divergence
Divergence occurs not only as a potential reversal of a trend, they can also be used as a sign for the continuation of a trend. You need to always remember, the trend is your friend, so whenever you can get a signal that the trend will continue, then it is good for you.
Hidden bullish divergence occurs when price action formed a higher low (Higher Low / HL), but the oscillator to form a lower low (Lower low / LL). It can be seen as a pairs are in a rising trend. After forming a low price that is higher and see the oscillator to form a lower low. Movement can you see in the picture below.
Finally, we have hidden bearish divergence. This happens when the price of forming a lower high (Lower High / LH), but the oscillator formed a higher high (Higher high / HH). this occurs when decline trend.
Hopefully this explanation will help you in understanding Divergence Trading and can apply it at the time of your trading.
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