Stochastic Oscillator Divergence Technical Indicator Bitcoin Trading
Divergence trading is one of the bitcoin trading signals that can be generated when using the divergence indicator stochastic oscillator.
Divergence on stochastic indicator is a signal that a rally or retracement is losing steam & is likely to reverse. It means that the last buyers or last sellers are pushing the bitcoin price in one way while the majority of other traders have stopped trading in that way & are cautious of a bitcoin price correction or retracement.
There are Four types of divergence trade setups that can be traded using this divergence technical indicator.
Example 1: BTCUSD Classic Bullish Divergence
A Bullish Divergence in the stochastic indicator & the bitcoin price is followed by a rise in bitcoin price.
stochastic divergence technical indicator
When the bitcoin price is making new lows the stochastic divergence indicator is not moving past its previous lows it is an indication that the down bitcoin trend is about to reverse and a bullish rally is likely to occur.
In the cryptocurrency trading example above the bitcoin price set a new low but it was not coupled with a new low in the measure of Stochastic, when bitcoin price formed a new low then the indicator should have followed suit, but the stochastic did not therefore the divergence setup.
This divergence setup is even stronger because there is combination of a divergence & then followed by a rise above the 20% level. This combines the Over-bought & Oversold levels.
Example 2: Bitcoin Classic Bearish Divergence
A Bearish Divergence in stochastic technical indicator & the bitcoin price is followed by a drop in bitcoin price.
stochastic divergence technical indicator
When bitcoin price is making new highs but the stochastic divergence indicator is not moving beyond its previous high it is an indication the up bitcoin trend will reverse and that a bearish divergence will follow.
This trade set-up is interpreted to be even stronger because there's a combination of a divergence with a dip below overbought 80 level.
Example 3: BTCUSD Hidden Bullish Divergence
This stochastic divergence indicator setup signifies a retracement in an upwards trend. This is the best type of divergence to trade, because you're not trading a bitcoin price bitcoin trend reversal, but you are trading within the direction of the Bitcoin market trend.
stochastic divergence technical indicator
Even though, the stochastic oscillator stochastic divergence indicator made a lower low the bitcoin price low was higher than the previous low (higher low). This means that even though the sellers made a good attempt to push bitcoin price down as indicated by the stochastic divergence indicator, this was not reflected on the bitcoin price, and the bitcoin price did not make a new low. This is the best place to buy bitcoin crypto, since it is even in an upward bitcoin trend there's no need to wait for a confirmation signal, because you are buying in an upward Bitcoin market trend.
Example 4: BTCUSD Hidden Bearish Divergence
This setup signifies a retracement in a downward trend.
stochastic divergence technical indicator
This is the best type of divergence to trade with this stochastic divergence indicator, because you are not trading a bitcoin price bitcoin trend reversal, but you are trading within the direction of the market trend. This is the best place to sell bitcoin crypto, since it is even in a down bitcoin trend there's no need to wait for a confirmation signal, because you are selling in a downward Bitcoin trend.
