Spotting Divergence Trader Strategies

Divergence Trader Strategies is one of the trade setups used by CFD traders. It involves looking at a cfd chart & one more cfd indicator. For our examples we shall use the MACD indicator.

To spot this divergence trader strategies find two chart points at which cfd price makes a new swing high or a new swing low but the MACD indicator does not, indicating a divergence between cfd price & momentum.

To look for Divergence trader strategies we look for two chart points, two highs that form an M-shape on the CFD Trading chart or two lows that form a W-Shape on the CFD Trading chart. Then look for the same M-shape or W-Shape on the CFD indicator you use to trade.

Example of a CFD Trading Divergence Trade Strategies:

In the CFD Trading chart below we identify two chart points, point A and point B (swing highs). These 2 points form an M-shape on the cfd price chart.

Then using MACD indicator we check the highs made by MACD, these are the highs that are directly below Chart points A & B.

We then draw one line on the CFD Trading chart & another line on the MACD technical indicator.

Drawing Divergence CFD Lines - Divergence trader strategies

The CFD chart above shows example of one of the four 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 CFD Trading Divergence trader strategies we look for the following:

• HH=Higher High- two highs but the last one is higher
• LH= Lower High- 2 highs but the last one is lower
• HL=Higher Low- 2 lows but the last one is higher
• LL= Lower Low- 2 lows but the last one is lower

First let us look at the illustrations of these divergence set up trading terms:

M-shapes dealing with CFD price Highs

Divergence trader strategies

W-Shapes dealing with CFDs price lows

Divergence trader strategies

Example of M Shapes

Divergence trader strategies

Examples of W Shapes

Divergence trader strategies

Now that you have learned the Divergence trader strategies terms which are used to explain trading set-up. Let us look at the 2 types of CFD Trading divergences & how to trade these divergence trader strategies setups.

There two types are:

1. Classic divergence trader strategies

2. Hidden divergence trader strategies

These 2 setups are the most oftenly used divergence trader strategies & these are described on the cfd strategies section of this website.