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Divergence

How to Trade Bullish DivergenceAt some point in your trading career, you will hear the term "Divergence Trading". Divergence simply means when the price and indicator are telling the trader two different things. It can be an effective addition to your trading strategy, especially if already using indicators like RSI or MACD to find overbought and oversold levels but should not be replied on by itself and requires practice to get it right. There are two types of Divergence you want to be familiar with: Regular bullish and bearish divergence and Hidden bullish and bearish divergence. In this educational tutorial, I will cover Bullish Divergence. You should note that the appearance of divergence doesn't happen 100% of the time, but when it does, you can use it for additional confluence (extra confirmation) for entering trades. Bullish Divergence Overview: A bullish divergence occurs when prices fall to a new low while an oscillator fails to reach a new low. This situation demonstrates that bears are losing power, and that bulls are ready to control the market again—often a bullish divergence marks the end of a downtrend. Notice in this example of GBPCAD, the price was in a downtrend and eventually came to a low at 5494 and rejected the area. The price shows a decline, while the RSI shows the oscillator moving higher. This is an example of regular bullish divergence, as it signaled a potential trend reversal. How to Draw Bullish Divergence You want to draw lines on successive tops and bottoms. Connect the tops and bottoms only, and keep your eyes on the price. If you draw a line connecting two lows on price, you MUST draw a line connecting two lows on the indicator. They have to match! Divergence only exists if the SLOPE of the line connecting the indicator tops/bottoms DIFFERS from the SLOPE of the line connecting the price tops/bottoms. Popular Indicators to Use When Identifying Divergence You can use indicators such as RSI, MACD, CCI, or Stochastic to trade divergence. Your selection in one of these indicators will depend on personal preference. I personally prefer the RSI at a 7 period. If you spot divergence but the price has already reversed and moved in one direction for some time, the divergence should be considered played out. You missed the boat this time. All you can do now is wait for another swing high/low to form and start your divergence search over. What is your favorite way to trade Divergence? Let me know in the comments! Happy Trading! :) - Brian & Kenya, BK FOREX ACADEMY
Education
by BKTradingAcademy
9
Ethereum ETHUSDT - Millennium Elliott Wave + 200 weekly MA!- As per my Elliott Wave analysis on the weekly scale, we have 2 impuls waves successfully completed and now we are missing the final impulse wave! - ABC correction (Wave 4) can be done, because wave 4 should not overlap the first wave. - 200 weekly moving average is currently acting as a very strong support! - Also the price is currently sitting on 0.786 fibonacci retracement. - If you take a look at RSI indicator, you can spot a bearish divergence from previous waves, which helps us to identify the Elliott wave structure. - Looks like the bear market can be over and we are ready for another massive bull market! - Check my related analysis for Bitcoin down below!
Long
by UnknownUnicorn2537518
3
The Future: New StrategyFor years, I've been focused primarily on support and resistance , supply and demand , and chart patterns, and it's been profitable, but over the last few months I've been really inspired by traders using Digital Signal Processing as well as divergence and linear regression in their strategies. I've been looking to work off some of the concepts explored by groups like TradeATS, as well as Robot Wealth (no advertisement I've just been inspired by their work), and I'm going to be moving more into that territory going forward. So I'll be relying less on spotting supply and demand zones (sort of) and chart patterns and more focused market cycles; using DSP to lock on to shorter wavelengths, especially in areas where my divergence fractals are piling up one after the other; drawing regression lines through those consolidation periods and using them as a my "t" axis; then, only trading once price swings reach a lower wavelength. When I get divergence signals above the t line, and above consolidation, I'll look to short the market, vice-versa when price is below t. I'm still working out how to deal with (confirm) rejections above and below the t axis, but this is where I'm headed. I once I started recognizing that consolidation doesn't just happen "sideways" and can also happen at an angle I was able to spot these cycles a lot easier by eye. The idea that, even while trending, price still oscillates around a fixed line is really promising, and I'm hoping it's something I can exploit in the future. I'm definitely going to be working on some indicators that can track these cycles as well, so be on the lookout for that. I'm pretty excited with this new direction and if you're interested in seeing how things develop, give me a follow because I'll be posting all about it. I highlighted two examples within the last week of the patterns I'm looking for. We're looking at about 70-100+ pips per swing! I'd take half of that, honestly.
by NeoDaNomad
2
Copper Futures setting up for a potential long tradeCopper / HG Futures market may be setting up for a move back to the upside. After a huge expanding bullish candle in the beginning of June that saw price blast through the volume Point of Control (POC) which goes back to October last year the price then immediately reversed and we have seen a sell off for the majority of this month. However yesterday we saw a spinning top candle form at a critical point which had been a support level, this has also painted bullish divergence on the RSI indicator. Further to the above technical analysis we have also seen net buying activity from commercial operators which indicates a slight under supply : demand imbalance. On many occasions large commercial buying can lead to a price hike as supply squeeze takes hold. Lastly commodity seasonal reports also show that copper does have a tendency to sell off in the beginning of June but then turns around at the end June and price upwards again through until end of July before dipping again coming into August. I would like to see price close above yesterdays close and hold above ~$4.05 which is roughly a support zone. Ideal entries could be above yesterdays high with price targets at ~$4.25 and / or ~$4.40, which are both just below previous support and resistance levels and large volume clusters. However if price cannot break above and hold $4.05 and instead falls and closes under $4.00 then I would not be looking at any long trades.
COMEX:HG1!Long
by gary_trades