Divergence Trader Strategies
Divergence Trader Strategies is one of the trade set-ups used by Bitcoin traders. It involves looking at a cryptocurrency chart & one more cryptocurrency indicator. For our example we shall use the MACD technical indicator.
To spot this divergence trader strategies find two chart points at which bitcoin trading price makes a new swing high or a new swing low but the MACD indicator doesn't, indicating a divergence between bitcoin trading price & momentum.
To look for Divergence trader strategies we look for two chart points, two highs that form an M-shape on the Cryptocurrency chart or 2 lows that form a WShape on the Bitcoin chart. Then look for the same M-shape or WShape on the Bitcoin indicator you use to trade.
Example of a Bitcoin Divergence Trade Strategies:
In the Bitcoin chart below we spot 2 chart points, point A & point B (swing highs). These two points form an M-shape on the bitcoin trading price chart.
Then using MACD indicator we check highs made by the MACD, these are the highs that are directly below Chart points A & B.
We then draw one line on the Cryptocurrency chart & another line on the MACD indicator.
Drawing Divergence Bitcoin Trading Lines - Divergence trader strategies
The Cryptocurrency chart above shows an example of one of the 4 types of divergence trader strategies, the one above is known as hidden bearish divergence strategy, one of the best type to trade.
How to spot divergence trader strategies
In order to spot Bitcoin Divergence trader strategies we look for the following:
- HH=Higher High- 2 highs but the last one is higher
- LH= Lower High- two highs but the last one is lower
- HL=Higher Low- two lows but the last one is higher
- LL= Lower Low- two lows but the last one is lower
First let us look at the illustrations of these divergence setup trading terms:
M-shapes dealing with BTCUSD price Highs
Divergence trader strategies
W Shapes dealing with BTCUSD price lows
Divergence trader strategies
Example of M Shapes
Divergence trader strategies
Examples of W Shapes
Divergence trader strategies
Now that you've learned the Divergence trader strategies terms that are used to explain setup. Let us look at the two types of Bitcoin divergences and how to trade these divergence trader strategies setups.
There two types are:
- Classic divergence trader strategies
- Hidden divergence trader strategies
These two setups are the most commonly used divergence trader strategies and these are explained on the bitcoin trading strategies section of this website.
