CFD Trading Divergence CFD Entry and Exit

Divergence CFD Trading Definition - Divergence cfd is one of the cfd setups used by CFD traders. Divergence cfd involves looking at a cfd chart & one more cfd indicator. For our divergence trading example we shall use the MACD cfd technical indicator.

To spot this  cfd divergence setup 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 cfd divergence between cfd price & momentum.

To look for divergence cfd signal we look for 2 chart points, two highs that form an M shape on the cfds trading chart or 2 lows that form a W-Shape on the cfds trading chart. Then look for the same M shape or WShape on the CFD indicator that you use to trade - for examples RSI indicator, MACD indicator or Stochastic Oscillator indicator.

Example of a CFD Trading Divergence Trade Setup:

In the cfds chart below we identify two 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 the 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 indicator.

Drawing Divergence CFD Lines - CFD Trading Divergence Strategy - CFD Trading Divergence CFD Entry & Exit

The cfd chart above shows example of one of the four types of cfd divergence setup, the one above is known as hidden bearish cfd trading divergence. Types of cfd divergence setups are covered in the next learn cfd lesson.

How to spot divergence cfd setup

In order to spot CFD Trading divergence signal we look for the following:

• HH - Higher High - 2 highs but the last one is higher
• LH - Lower High - 2 highs but the last one is lower
• HL - Higher Low - two 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 cfd terms:

M shapes on CFDs charts dealing with CFD price Highs

W Shapes on CFDs charts dealing with CFD price lows

Example of M Shapes on CFDs Charts

Examples of W Shapes on CFD Charts

Now that you've learned the divergence cfd terms that are used to explain divergence trading set-up. Let us look at the 2 types of cfd divergences and how to trade these cfds trading divergence chart setups.

The two cfds trading divergence types which are:

1. Classic CFD Trading Divergence
2. Hidden CFD Trading Divergence

These two cfd divergence setups - classic divergence trading & hidden divergence trading are explained on the following learn cfd guides in the cfd trading lessons tutorials on this website located at the navigation menu under the topics learn cfd lessons.