CFD Trading Divergence Scanner
cfd trading classic divergence is used as a possible signal for a CFD trend reversal and is used by traders to analyze cfd price movement and identify areas where the price could reverse and start going in the opposite direction. CFD Trading classic divergence setup is used as a low risk entry method when opening a cfd trade or when exiting a cfd trade.
Classic divergence cfd strategy is a low risk method to sell near the cfd market top or buy near the cfd market bottom, this makes the trading risk on your trades are to be small relative to potential reward. However, this classic divergence cfd strategy is one method with very many whipsaws and most traders do not recommend using it.
Divergence in CFD is also used to predict the optimum point at which to exit an open cfd trade. If you already have an open cfd trade that is already profitable, a good method to identify a profit taking level would be to use the point where you spot this divergence cfd trading setup.
There are 2 types of classic trading divergence, based on the direction of the current CFD trend:
- CFDs Classic Bullish Divergence
- CFD Classic Bearish Divergence
CFD Trading Classic Divergence Scanner
CFD Trading classic bullish divergence forms when price is making lower lows ( LL ), but the indicator is making higher lows (HL). The divergence cfds trading example explained and illustrated below shows classic trading divergence setup.
CFD Trading Divergence Scanner - CFD Trading Classic Divergence Set Up Scanner
This cfd divergence example uses MACD indicator as a cfd divergence technical indicator.
From the above cfds trading divergence scanner example the cfd price made a lower low(LL) but the MACD indicator made a higher low(HL), this shows there is a divergence between the cfd price and the MACD indicator. This divergence cfd signal warns of a possible cfd trend reversal.
Classic bullish divergence cfd signal warns of a possible reversal in the cfd trend from downward trend to upward trend - because even though the cfd price went lower the volume of sellers that moved the cfd price lower was less as shown by the MACD indicator. This divergence cfd signal indicates underlying weakness of the downward cfds trend.
CFDs Trading Classic Divergence Scanner
CFD Trading classic bearish divergence forms when price is making a higher high ( HH ), but the indicator is forming a lower high (LH). The cfds trading divergence scanner example explained and illustrated below shows an example of the classic bearish cfds trading divergence cfd trading setup.
CFD Trading Divergence Scanner - CFD Trading Classic Divergence Set Up Scanner
This divergence scanner cfds trading example also uses MACD cfd trading technical indicator
From the above example the cfd price made a higher high(HH) but the MACD indicator made a Lower High(LH), this shows there is divergence between the cfd price and the MACD indicator. This divergence cfd signal warns of a possible cfd trend reversal.
Classic bearish divergence cfd signal warns of a possible reversal in the cfd trend from upward trend to downwards trend - this is because even though the cfd price went higher the volume of buyers who pushed the cfd price higher was less as illustrated by the MACD indicator. This signals underlying weakness of the upwards trend.
In the above example, if you as a trader had used divergence to trade you would have gotten good trading signals to enter or exit the trades at an optimal point. However, divergence cfd signals just like other cfd indicators, is also prone to whipsaws. That is why it's always good for cfd traders using this cfd setup to confirm the divergence cfd signals with other cfds trading technical indicators such as RSI, Stochastic Oscillator & Moving Averages.
An good cfd indicator to combine divergence cfd signal with is the moving average technical indicator, in this moving average trading indicator a trader should use the Moving Average Crossover System - Moving Average Crossover CFD System and Divergence CFD
Example of Moving Average Crossover CFD Strategy
Once the divergence cfd signal is given, a trader will then wait for the Moving average crossover cfd system to give a cfd signal in the same direction of the cfds trading divergence signal, if there is a classic bullish divergence signal, a trader will wait for the moving average crossover cfd strategy to give an upward crossover cfd trading signal, while for a bearish classic divergence cfd signal the trader will wait for the Moving average crossover cfd strategy to give a downward bearish crossover cfd trade signal.
By combining the cfd trading classic divergence signals with other technical cfd indicators this way, a trader will be able to avoid cfd trading whipsaws when it comes to trading the classic divergence cfds trading signals, because the trader will wait until the cfd trend has actually reversed & is already moving towards the direction of the divergence trade setup, hence the trader will not fall into the trap of picking market tops & market bottoms.
