Hidden Bullish & Commodity Trading Hidden Bearish Divergence Commodities Trading
Hidden divergence trading strategy is used as a possible sign for a commodity market trend continuation after the price has retraced. It is a trading signal that the original commodity trend is resuming. This is the best divergence setup to trade because it's in the same direction as that of the continuing market trend.
Divergence trading strategy
This divergence trading setup happens when price is making a higher low ( HL ), but the oscillator (indicator) is showing a lower low (LL). To remember them easily think of them as W-shapes on Chart patterns. It occurs when there is a retracement in an upwards Commodity Trading trend.
The example illustrated and shown below shows an image of this divergence set up, from the image the commodity price made a higher low (HL) but the indicator made a lower low (LL), this shows that there was a divergence signal between the commodity price and indicator. This signal shows that soon the commodities trading market up commodity trend is going to resume. In other words it shows this was just a retracement in an upwards commodity trend.
Divergence trading strategy
This confirms that a retracement move is complete and indicates underlying strength of an upward commodities trend.
Commodities Hidden Bearish Divergence
This setup happens when price is making a lower high ( LH ), but the oscillator is showing a higher high (HH). To remember them easily think of them as M-shapes on Chart patterns. It occurs when there is a retracement in a downward Commodity Trading trend.
The example illustrated and shown below shows an image of this commodity trading setup, from the image the commodity price made lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the commodity price & the indicator. This shows that soon the commodities trading market down commodity trend is going to resume. In other words it shows this was just a retracement in a downward trend.
Divergence trading strategy
This confirms that a retracement move is complete and indicates underlying strength of a downward commodities trend.
Other popular indicators used are CCI indicator (Commodity Trading Channel Index), Stochastic Oscillator, RSI & MACD. MACD & RSI are the best technical indicators.
NB: Hidden divergence is the best type to trade because it gives a signal that is in the same direction with the current market trend, thus it has a high reward to risk ratio. It provides for the best possible entry.
However, a trader should combine this commodities trading setup with another indicator like the stochastic oscillator or moving average and buy when the price is oversold, and sell when the price is overbought.
Combining Hidden Commodity Trading Divergence with Moving Average Commodities Trading Crossover Strategy
A good indicator to combine these commodity trading setups is the moving average indicator using the moving average crossover method. This will create a good trading strategy.
Moving Average Crossover Technique - Divergence trading strategy
In this divergence commodity strategy, once the trading signal is given, a trader will then wait for the moving average cross over technique to give a buy/sell trading signal in same direction, if there's a bullish divergence setup between the commodity price and indicator, wait for the moving average crossover system to give an upwards cross over signal, while for a bearish divergence set-up wait for the moving average crossover system to give a downward bearish crossover signal.
By combining this Divergence trading strategy with other indicators this way a trader will avoid whipsaws when it comes to trading with this commodity trade signal.
Combining with Commodity Fibonacci Retracement Levels
For this example we shall use an upward market trend. Commodity Trading - We shall use MACD indicator.
Because the hidden divergence is just a retracement in an upwards commodity trend we can combine this commodity signal with most popular retracement tool that's the Fibonacci retracement levels. The example illustrated and shown below shows that when this commodities set up appeared on the chart, commodity price had just hit the 38.20% level. When commodity price tested this level, this would have been a good level to set a buy order.
Divergence trading strategy set up
Combining with Commodity Trading Fibonacci Expansion Levels
In the commodities trading example above once the buy commodity trade was placed, a trader would then need to calculate where to set take profit for this trade. To do this a trader would need to use the Commodity Fib Expansion Levels.
The Fibonacci expansion was drawn as shown on the commodity chart as illustrated and shown below.
Divergence trading strategy set up
For this example there were 3 take profit areas:
Commodity Trading Fibo Expansion Level 61.8% - 131 pips profit
Fibonacci Expansion Level 100.0% - 212 pips profit
Fibonacci Expansion Level 161.8% - 337 pips profit
From this divergence trading strategy combined with Fibonacci would have provided a good strategy with a good amount of profit set using these take profit areas.
