How To Trade Divergence – KEY TRADING TIPS!

Published on August 20, 2021

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👉 How to trade divergence
Divergence simply means to deviate from or to do diverge. This definition should provide a clue as to what a divergence setup is. The forex trading divergence strategy employs the use of any suitable oscillator such as the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD) indicator. The oscillators used for this strategy are found on the MT4 or MT5 platforms.

👉 What is Divergence?
A situation where the price and the indicator are pointing in the opposite directions.

👉 How many types of divergences are there?
– Regular divergence
– Extreme divergence
– Continuing divergence
– Hidden divergence

👉 Key tips to trade divergence
– stick to the higher time frames (at least in the beginning while you are still a newbie)
– apply cycles or wave analysis to your trading. The combination between divergences and cycles is amazing! You will be surprised how accurately tops and bottoms are identified.
– use strong resistance and support levels. This is a must for pretty much any trading strategy.

– using false breaks. The false break pattern in its nature suggest that the momentum is losing its power. This is exactly what the divergence is telling us. False breaks are your best friend when it comes to divergences.

👉 MACD divergence
When using MACD indicator we can spot divergence on the moving averages as well as the histogram.
When the divergence appears on both at the same time, it is a confirmation for a stronger signal.

👉 RSI divergence
RSI as mentioned above could also be used to spot divergences. One small trick here. Make sure at least the first high or low is inside extreme. Extreme being above the level of 70 (at least) or below the level of 30.

👉 Divergence on both RSI and MACD?
Why not? Actually it is even better as we have another confirmation. Now what if we have MACD histogram + MACD moving average + RSI divergence at the same time? Go to the charts and see what happens.

👉 Short term divergence
As the market moves in cycles on each time frame we see the different time frames completing those cycles and forming divergences. You can benefit from those intraday moves using the powerful combination of market waves/market cycles and divergences. A short term divergence would be considered as anything below H4 chart.

👉 Long term divergence
Longer term divergences are considered for any time frame above H4. Four hour chart being the bridge between intraday and longer term/swing traders might be the ideal option for those looking to trade something in between short term and long term.

👉 Risk reward
Theoretically speaking you can make money with bad risk-reward ratio but for some reason all successful traders i’ve met in my career, rely on risk reward ratio to achieve long term success. A risk reward ratio in general means the relationship between the potential loss and the potential profits. Meaning – for every $1 that you are going to risk, what is your potential profit?

👉 Multi time frames
Multi time frame analysis is a key level to your success. Knowing what is going on in the longer term makes sure you are trading in the right direction. You don’t want to be stuck in a situation where daily and weekly charts are in a strong bearish trend, without any signs for reversal, while at the same time you are attacking the H4 chart for buys. Chances are, it will end badly.

Master Divergences with the Divergence University course here –

👉 https://www.divergenceuniversity.com

✔️ To learn more about the usage of the MACD and RSI and divergence combination –
✔️ MACD – https://youtu.be/JPdQQn-nsGk
✔️ RSI – https://youtu.be/iMUbhhF7VGE
✔️ Hidden Divergence – https://youtu.be/SijP6BfaV7c
✔️ MACD + RSI Powerful Forex Trading Strategy

✔️ 3 Steps MACD Trading Strategy For Forex Traders

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How To Trade Divergence

How To Trade Divergence, How To Trade Divergence – KEY TRADING TIPS!.

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