Divergence CFD Setups
Divergence CFD Setup is one of the trade setups used by CFD traders. It involves looking at a cfd chart & one more cfd indicator. For our example we shall use the MACDcfd technical indicator.
To spot this cfd divergence trading setup find 2 chart points at which cfd price makes a new swing high or a new swing low but the MACD indicator doesn't, indicating a divergence between cfd price & momentum.
To look for divergence cfd setup we look for two chart points, two highs that form an M-shape on the cfds trading chart or two lows that form a W-Shape on the cfds trading chart. Then look for same M-shape or W-Shape on the indicator you use to trade.
Example of a CFDs Divergence Trade Setup:
In the cfds chart below we identify 2 chart points, point A and point B (swing highs). These 2 chart points form an M-shape on the cfd price chart.
Then using MACD indicator we check highs made by MACD technical indicator, these are the highs that are directly below Chart points A and B.
We then draw one line on the cfds trading chart & another line on the MACD cfd technical trading indicator.
Drawing CFD Divergence CFD Lines
The cfd chart above shows example of one of the 4 types of cfd divergence setups, the one cfd divergence setup above is known as hidden bearish cfd divergence trading setup, one of the best type to trade. Types of cfd divergences are covered in the next learn cfd tutorial lesson.
How to spot cfd divergence setups
In order to spot CFDs divergence signal we look for 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 cfd divergence terms:
M-shapes dealing with CFDs price Highs
W-Shapes dealing with CFD price lows
Example of M Shapes on CFDs Charts
Examples of W Shapes on CFD Charts
Now that you have learned the cfd divergence trading terms that are used to explain divergence cfd set-up. Let us look at the two types of divergences and how to trade these cfd chart setups.
There two types are:
- Classic Divergence CFD Setups
- Hidden Divergence CFD Setups
These two set ups are described on the following tutorials below
Trading CFD With Divergence on MT4 MT5 PDF Download - Trading CFD With Divergence on MT4 MetaTrader 5 PDF Free Download - MT4 MT5 Divergence CFD Tutorial.
