Divergence Bitcoin Setups - Trading Bitcoin Using Divergence Trade Setup
Divergence setup is one of the BTCUSD trade setups used by Bitcoin traders to analyze prices of BTCUSD and try to predict the next likely direction of Bitcoin prices. It involves looking at the Bitcoin price chart and one more technical indicator. For our example we shall use MACD indicator.
To spot this divergence trade setup find 2 chart points at which price forms a new swing high or a new swing low but MACD indicator doesn't, indicating there's a divergence setup between the price and the momentum.
To look for divergence setups we look for two chart points, 2 highs that form an M-shape on the BTCUSD price chart or two lows that form a W Shape on the BTCUSD price chart. Then look for the same M Shape or W Shape on the indicator which you use to trade.
Example of a Bitcoin Price Divergence Trade Setup:
In the BTCUSD chart below we spot 2 chart points, point A ==22==and point B (swing highs). These two chart points form an M Shape on the price chart.
Then using the MACD indicator we analyze the highs made by the MACD technical indicator, these are highs that are directly below Chart points A and B.
We then draw one line on the Bitcoin Crypto Currency chart and another line on the MACD technical indicator as shown below.
Bitcoin - Divergence Setup - Drawing Divergence Lines
The BTCSUD price chart above shows an example of one of the 4 types of divergence setups, the one above is known as hidden bearish divergence, one of the best types to trade. Various types of divergence setups are explained in the next trading tutorial.
How to Spot Divergence Trade Setup
In order to identify a Bitcoin divergence signal we look for the following:
HH = Higher High - 2 highs but last is higher, LH = Lower High - two highs but last is lower, HL = Higher Low - 2 lows but last is higher, LL = Lower Low - two lows but last is lower
First let us look at the illustrations of these terms:
M-shapes dealing with Bitcoin price Highs
W Shapes dealing with price lows
These concepts above are explained below using BTCUSD price charts and MACD indicator.
Example of M Shapes on Bitcoin Price Charts
Example of W-Shapes on Bitcoin Price Charts
Now that you've learned the divergence terms that are used to explain the divergence setups. Let us look at the 2 types of divergences and how to trade these setups on BTC USD ==22==CryptoCryptoCurrency price charts.
There two types are of divergence setups:
- Classic BTCUSD Divergence
- Hidden Bitcoin Divergence
These two divergence setups are presented on the next guides.
Study More Topics and Courses:
- How to Use MT5 Android BTC USD App Tutorial Course for Beginner
- What is a BTC/USD Demo Account?
- BTCUSD Trading Real Account Opening Course Tutorial
- Procedure for Register BTC USD Account Procedure of Register BTC USD Account
- How Can You Trade Bitcoin & Place a Pending BTCUSD Order in MT5 iPhone App?
- How Can You Draw Fibonacci Pullback in MT4 Software Platform?
