Divergence Strategy
Hidden divergence trading strategy is used as a possible sign for a cryptocurrency trading market trend continuation after the bitcoin trading price has retraced. It is a trading signal that the original bitcoin trend is resuming. This is the best divergence setup to trade because it's in the same direction as that of the continuing market trend.
Divergence trading strategy
This divergence trading setup happens when bitcoin price is forming a higher low ( HL ), but the oscillator (indicator) is showing a lower low (LL). To remember them easily think of them as W-shapes on Chart patterns. It occurs when there is a retracement in an upwards Bitcoin trend.
The example illustrated below shows an image of this divergence set up, from the image the bitcoin trading price made a higher low (HL) but the indicator made a lower low (LL), this shows that there was a divergence signal between the bitcoin price & indicator. This signal shows that soon the btcusd trading market up bitcoin trend is going to resume. In other words it shows this was just a retracement in an upward bitcoin trend.
Divergence trading strategy
This confirms that a retracement move is complete and indicates underlying strength of an upward cryptocurrency trend.
Bitcoin Hidden Bearish Divergence
This setup happens when bitcoin price is forming a lower high ( LH ), but the oscillator is showing a higher high (HH). To remember them easily think of them as M-shapes on Chart patterns. It occurs when there is a retracement in a downward Bitcoin trend.
The example illustrated below shows an image of this bitcoin trading setup, from the image the bitcoin trading price made lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the bitcoin trading price & indicator. This shows that soon the btcusd trading market down bitcoin trend is going to resume. In other words it shows this was just a retracement in a downward trend.
Divergence trading strategy
This confirms that a retracement move is complete and indicates underlying strength of a downward cryptocurrency trend.
Other popular indicators used are CCI indicator (Commodity Channel Index), Stochastic Oscillator, RSI and MACD. MACD & RSI are the best trading indicators.
NB: Hidden divergence is the best type to trade because it gives a signal that is in the same direction with the current market trend, thus it has a high reward to risk ratio. It provides for the best possible entry.
However, a trader should combine this cryptocurrency trading setup with another indicator like the stochastic oscillator or moving average and buy when the bitcoin trading price is oversold, and sell when the bitcoin trading price is overbought.
Combining Hidden BTCUSD Trading Divergence with Moving Average Bitcoin Trading Crossover Strategy
A good indicator to combine these bitcoin trading setups is the moving average indicator using the moving average crossover method. This will create a good trading strategy.
Moving Average Crossover Technique - Divergence trading strategy
In this divergence bitcoin strategy, once the trading signal is given, a trader will then wait for the moving average cross-over technique to give a buy/sell cryptocurrency trading signal in same direction, if there's a bullish divergence setup between the bitcoin price & indicator, wait for the moving average cross-over system to give an upward crossover signal, while for a bearish divergence set-up wait for the moving average cross-over system to give a downwards bearish crossover signal.
By combining this Divergence strategy with other indicators this way a trader will avoid whipsaws when it comes to trading with this bitcoin trade signal.
Combining with BTCUSD Trading Fib Retracement Levels
For this example we shall use an upward market trend. BTCUSD Crypto Trading - We shall use MACD indicator.
Because the hidden divergence is just a retracement in an upwards bitcoin trend we can combine this cryptocurrency signal with most popular retracement tool that's the Fibonacci retracement levels. The example illustrated below shows that when this cryptocurrency set up appeared on trading chart, bitcoin trading price had just hit the 38.20% level. When bitcoin price tested this level, this would have been a good level to set a buy order.
Divergence trading strategy setup
Combining with BTCUSD Trading Fib Expansion Levels
In the cryptocurrency trading example above once the buy bitcoin trade was placed, a trader would then need to calculate where to set take profit for this trade. To do this a trader would need to use the BTCUSD Trading Fib Expansion Levels.
The Fibo expansion was drawn as shown on the btcusd chart as illustrated and shown below.
Divergence trading strategy setup
For this example there were three take profit areas:
Fibo Expansion Level 61.80% - 131 pips profit
Fibo Expansion Level 100.00% - 212 pips profit
Fibo Expansion Level 161.80% - 337 pips profit
From this divergence trading strategy combined with Fibonacci would have provided a good strategy with a good amount of profit set using these take profit areas.
