Spotting Divergence Trader Strategies

Divergence Trader Strategies is one of the trade set-ups used by Commodity traders. It involves looking at a commodity chart & one more commodity indicator. For our examples we shall use the MACD technical indicator.

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

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

Example of a Commodity Divergence Trade Strategies:

In the Commodity Trading chart below we spot 2 chart points, point A and point B (swing highs). These 2 points form an M-shape on the commodity price chart.

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

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

Drawing Divergence Commodity Lines - Divergence trader strategies

The Commodities Trading chart above shows an example of one of the 4 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 Commodity Trading Divergence trader strategies we look for the following:

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

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

M-shapes dealing with Commodity price Highs

Divergence trader strategies

W-Shapes dealing with Commodities 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 that are used to explain setup. Let us look at the two types of Commodity 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 commonly used divergence trader strategies & these are explained on the commodity trading strategies section of this site.