Divergence Gold Setups

Divergence Setup is one of the trade setups used by the traders. It involves looking at a chart and one more indicator. For our examples we shall use the MACD indicator.

To spot this trading set-up find 2 chart points at which price makes a new swing high or a new swing low but MACD doesn't, indicating a divergence setup between price and momentum.

To look for a divergence trade setup we look for 2 chart points, 2 highs that form an M-shape on the Trading chart or 2 lows that form a W Shape on XAUUSD Trading chart. Then also look for the same M-Shape or W-Shape in the indicator you use to trade.

Example illustration of a Divergence Setup:

In the trading chart below we identify 2 chart points, point A & point B (swing highs). These 2 points form an M-Shape on the price chart.

Then using MACD we check highs made by the MACD, these are highs which are directly below Chart points A and B.

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

Drawing Divergence Lines

The chart above displays example of one of the 4 types of divergences, the one above is known as hidden bearish divergence, one of best type to trade. Types of divergence setups are covered in the next lesson.

How to spot divergence setup

In order to identify XAUUSD Trading diverging signal we check for the following:

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

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

M-shapes dealing with price Highs

W Shapes dealing with price lows

Example illustration of M-Shapes

Examples of W-Shapes

Now that you as a trader have learned the divergence terms that are used to explain set-up. Let us look at the2 types of divergences and how to trade these chart setups and patterns.

There two types are:

1. Classic Divergence

2. Hidden Trade Divergence

These two setups are explained on the following guides below

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