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