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Many traders that are using technical analysis for their forex strategies are focusing primarily on singles they are giving. But there are also hidden signals in some indicators such as: MACD, RSI, Stochastic, Momentum, and other oscillators. These hidden signals are called divergences. Divergence is one of the most impressive techniques in technical analysis. In forecasting currency movements the more advanced traders are paying much attention to it. Amazing results can be achieved trough to it. The divergence is characterized by the gap between the chart and the indicators, or more precisely the direction of movement of the price and the indicator.
In the last years, more and more traders are paying attention to the divergence. In combination with other techniques can be achieved amazing results and profits.
Divergence Itself gives us clarity of an impending change in the trend or a continuation of the trend. There are two main types of divergences: normal (bullish or bearish) and hidden (bullish or bearish)Normal (negative) divergence:
Bullish divergence - in this type of divergence as it is seen from the chart. Price draws two bottoms, the second is lower than the first, b…
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WallStreet6 avatar

Very interesting!

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 A divergence is when a security and a
related, normally highly correlated,
momentum oscillator or alternative pair move in opposite
Normally A trader can look to two highly
correlated stocks, futures, commodities and currency pairs to see if a
divergence is occuring between two. For example we may see the inverse DXY
(USD index) to be rising along with ES_F (Emini SP500 futures) when this
occurs something has to change...
Divergences are a low risk
way of picking tops or bottom in the markets as they are easy to spot and
even easier to trade profitably.
In this guide we will concentrate on using
indicators for a specific FX pair and not talk about intra-pair
To do this we will use momentum oscillators,
you can use anything from Stochastics, RSI, MACD (moving average
convergence DIVERGENCE) or even CCI.
Most strategies using indicators are LAGGING.
i.e. they require past price action to predict future such as a stochastic
crossover or RSI moving up under 30.
divergence trading are LEADING strategies.
Types of divergences:
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FX_Swingtrader avatar

Quick Question - Would you recommend scalping with this or do you prefer Swing or longer timeframe trades.

AdrianWS avatar
AdrianWS 14 Jan.

Personally I prefer Swing trades with divergences as the moves made from these don't always follow fully throughso you have more time to react with swing trades. Also Any suggestions for a new article? What does everyone want to learn?

kkforex avatar
kkforex 18 Jan.

Nice writeup...especially hidden divergence 1+

men79 avatar
men79 21 Jan.

Very good ...

AdrianWS avatar
AdrianWS 28 Jan.

Thanks everyone for their support, see you next month, I hope to include Elliot waves, Gann analysis and much more.

orto leave comments