Trading Divergence : What if there was a low-risk strategy to sell close to the trend’s peak or to buy close to its trough?
Instead of watching your unrealized gains, such as your potential down payment on an Aston Martin or your upcoming purchase of a pair of Christian Louboutin heels, disappear before your eyes because your trade reverses direction, what if you were already in a long position and you knew ahead of time the ideal place to exit?
What if you think a currency pair will keep falling but want to sell short at a better price or a less dangerous entry point?
Guess what, though? There is a solution!
its called Divergence Trading
To put it briefly, divergence can be detected by contrasting price movement with an indicator’s movement.
Whichever indicator you choose to utilize is really not important.
Useful indicators include RSI, MACD, stochastic, CCI, etc.
Divergences are fantastic since you can use them as a leading indicator, and with a little skill, you won’t have any trouble spotting them.
Divergences can be beneficial to trade when done correctly.
Divergences are great because you’re typically purchasing near the bottom or selling near the top.
Because of this, the risk associated with your transactions is quite low compared to the potential gain.
Trading Divergence
Simply consider “higher highs” and “lower lows.”
Price and momentum typically follow one another.
The oscillator should likewise be reaching higher highs if the price is making higher highs. The oscillator ought to be making lower lows if the price is making lower lows.
If they are not, then there is a divergence between the oscillator and the price. And for this reason, it is known as “divergence.”
Divergences serve as a warning to you that something is off and you should pay closer attention, making divergence trading a fantastic tool to have in your toolkit.
Divergence trading can be helpful in identifying a trend that is waning or a change in momentum. In other cases, you can even consider it as an indication that a trend will persist!
There are TWO types of divergence:
1. Regular
- 2. Hidden
Next Lesson: Regular Divergence
