Bitcoin Trading Divergence Strategy
Divergence Bitcoin Definition - Divergence bitcoin trading is one of the bitcoin trading setups used by Bitcoin traders. Divergence bitcoin trading involves looking at a cryptocurrency chart & one more cryptocurrency indicator. For our divergence examples we shall use the MACD bitcoin technical indicator.
To spot this cryptocurrency trading divergence setup find two chart points at which bitcoin price makes a new swing high or a new swing low but the MACD cryptocurrency indicator doesn't, indicating a cryptocurrency trading divergence between bitcoin price & momentum.
To look for divergence cryptocurrency signal we look for two chart points, 2 highs which form an M shape on the cryptocurrency chart or 2 lows that form a WShape on the crypto chart. Then look for the same M-shape or WShape on the Bitcoin indicator that you use to trade - for examples RSI cryptocurrency indicator, MACD cryptocurrency indicator or Stochastic Oscillator technical indicator.
Example of a Cryptocurrency Divergence Trade Setup:
In the cryptocurrency chart below we spot 2 chart points, point A & point B (swing highs). These two chart points form an M-shape on the bitcoin price chart.
Then using MACD cryptocurrency technical indicator we check the highs made by the MACD technical indicator, these are highs that are directly below Chart points A & B.
We then draw one line on the cryptocurrency chart & another line on the MACD technical indicator.
Bitcoin Trading Divergence Strategy
The cryptocurrency chart above shows an example of one of the 4 types of cryptocurrency trading divergence set up, the one above is known as hidden bearish bitcoin divergence. Types of cryptocurrency trading divergence set ups are covered in the next learn bitcoin trading lesson.
How to spot divergence bitcoin trading setup
In order to spot Cryptocurrency divergence trading signal we look for the following:
- HH - Higher High - two highs but the last one is higher
- LH - Lower High - two highs but the last one is lower
- HL - Higher Low - 2 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 bitcoin trading terms:
M shapes on Crypto charts dealing with BTCUSD price Highs
W Shapes on Cryptocurrency charts dealing with BTCUSD price lows
Example of M Shapes on Cryptocurrency Charts
Examples of W Shapes on Crypto Charts
Now that you have learned the divergence bitcoin trading terms which are used to explain divergence setup. Let us look at the two types of bitcoin trading divergences and how to trade these bitcoin divergence chart setups.
The two bitcoin divergence types which are:
- Classic Bitcoin Divergence
- Hidden Bitcoin Divergence
These two cryptocurrency trading divergence setups - classic bitcoin divergence trading and hidden bitcoin divergence trading are described on the following learn bitcoin trading guides in the bitcoin lessons tutorials on this website located at the navigation menu under the topics learn bitcoin trading lessons.
