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Hidden Divergence
Hello there, you will be excited about the information contained in this report.
Isn’t it remarkable how people like us who are in the “Trading” business have taken frequently interesting words that are used each day and turned them around to meet our own needs?
Let me explain. Words such as ‘trend,’ and ‘line,’ for example are generally used together in a sentence. The first word in the sentence would be ‘trend,’ and it is an adjective that describes the next word, ‘line,’ which is a noun. In this example, they are two separate entities.
However, in the trading world, when both words are combined to read “trend line,” it becomes one entity because it is compounded into the word, ‘trendline.’ This word is only for those who can wrap their minds around the thought of using a word that cannot be found either in the dictionary or a part of the rules of the English Language.
The word, ‘Divergence,’ has the same connotation…
If you were to look in the major search engines such as Google, you would find that the word, “divergence” has nothing to do with trading. In the trading industry, however, the word, ‘divergence,’ has a whole meaning of its own.
We are about to explore it in ways that will help you to recognize and authenticate higher trade probabilities.
To increase your profit margin, you should utilize the resources and tools that you have available to you as it relates to a combination and formations of MACD and RSI divergent.
Warning: Do not be perplexed or be confused with the regular trendlines and the ones related to divergence.
When you are in the process of drawing a standard bullish trendline, you will have to connect the ‘higher,’ lows to connect them. On the other hand, when you are in the process of drawing the usual bearish trendlines, you have to connect the ‘lower,’ highs.
Let’s look at the the different between this and divergence.
Hidden Divergence versus Divergence
Divergence
A lot of people like me get involved in day trading. I use various strategies in my day trading that include trendlines and other indicators, but divergence has equal significance when it comes to currency strength and weakness calculations.
Most of my trades close within a twenty four time frame after I enter the market. However, I have reached the realization that if divergence is understood and used in the right way, it can be the best trading asset that any trader can ask for especially if utilized at the higher time periods that include daily, weekly and monthly charts.
The Reason: The MACD indicator results in a stronger and more precise signal when the long term data calculations are made.
In the chart below, you will see the new lows in the series. The vertical lines that point downward, relate to the new lows that are located on the MACD indicator. However, you will notice, too, that the new MACD lows failed to reach a similar depth as the preceding low. Each of these lows was higher. There are a few things to note here:
Additionally, the chart below shows the comparison between the MACD and the price chart. It gives you a warning of the reversal opportunity and trendline break confirmation identified by the color red on the price chart, on the MACD and the RSI.
You can find the divergence using other indicators even though the MACD is the ideal determinant when it comes to divergence. An example is shown in the RSI chart.
There is another divergence form that we will discuss in this lesson.
Now follow along with me…..
IF
The displayed chart below reflects Bullish Divergence at the time when the price is extremely reduced while at the same time the matching indicator achieves higher lows.
AND
The displayed Bearish Divergence at the time when the price shows an extreme high while the matching indicator achieves lower highs.
THEN
In comparison, Bullish Hidden Divergence is shown at the time when the price gets to higher lows while the matching indicator achieves lower lows.
When the hidden divergent indicator is corroborated with trendline breaks on the price chart and the RSI is backed up by an ensuing retraction to the price trendline even as the RSI has made its way into bullish terrain……
We are not afraid to enter the long side of the market We have confidence to enter inside of the shaded area below because of its heightened possibility trade.
When you enter into the market, you will find that a protective stop appears right away below the previous low. This gives us a kind of secure net to reduce the risk aspect of only 30 pips.
The Bearish Hidden Divergence is shown when price gets to a lower high while the corresponding indicator achieves a higher high. This happens when there is a down trending market.
In the chart below, a price retraction matches with a “distinctive” higher high on the Stochastic oscillator. This indicates that there is a potential for the bearish move to
