Gold Trading Divergence XAUUSD Trading SETUPS SUMMARY
XAUUSD Classic Bearish Divergence - HH gold trading price, LH indicator - Indicates underlying weakness of a xauusd trend - Warning of a possible change in the xauusd trend from up to down.
Gold Classic Bullish Divergence - LL gold trading price, HL indicator - Indicates underlying weakness of a xauusd trend - Warning of a possible change in the xauusd trend from down to up.
XAUUSD Hidden Bearish Divergence - LH gold trading price, HH indicator - Indicates underlying strength of a xauusd trend - Mainly found during corrective rallies in a downwards trend.
Gold Hidden Bullish Divergence - HL gold trading price, LL indicator - Indicates underlying strength of a xauusd trend - Occurs mainly during corrective declines in an upward gold trend.
Divergence Forum - Illustrations of the divergence terms:
M-shapes dealing with XAUUSD price highs
M-shapes - Divergence Forum
W-shapes dealing with Gold price lows
W-shapes - Divergence Forum
These are divergence shapes to look for when using these xauusd setups.
One of the best xauusd indicator for this xauusd setup is the MACD Indicator - as a xauusd signal MACD divergence is a setup to enter a xauusd trade. But as with any signal there are certain precautions which have to be observed to make this xauusd trading signal a setup. Getting straight in to a trade as soon as you see this xauusd setup is not the best strategy. This setup should be used in combination with another gold technical indicator to confirm the direction of the trend. A good system to combine with is the moving average cross over system.
Be aware this xauusd setup on a smaller time frame is not so significant. When divergence is seen on a 15 minute chart it may or may not be very important as compared to the 4 hour chart timeframe on MT4 software.
If divergence setup seen on a 60 minute chart, 4 hour chart, or daily chart timeframe, then start looking for other factors to indicate when the gold trading price might react to the divergence.
This brings us to a key point when using this divergence setup signal to enter a trade: on a higher time frame MACD divergence can be a fairly reliable indicator of a change in gold trading price direction. However, the big question is: WHEN? That is why getting straight in to a trade as soon as you see this xauusd setup is not always the best strategy.
Many xauusd traders get caught out by entering the xauusd market too soon when they see MACD divergence. In many cases, gold trading price has still got some momentum to continue in the current direction. The investor who has jumped in too soon can only stare at screen in dismay as gold trading price shoots through his stop-loss taking him out.
If you simply look for this divergence trading setup without any other considerations you will not be aligning yourself with the best odds, so to increase the odds of making a successful trade you should also look at other factors, specifically other xauusd indicators.
What other factors should you consider when using this XAUUSD setup?
1. Support level, Resistance levels and Gold Trading Fibonacci levels on higher Gold Chart Timeframes
Another way to greatly increase the odds of a winning trade is to observe the higher chart time-frames before opening an order based on the lower time-frames.
If you observe that the hourly, 4 hour or daily XAUUSD Trading chart has met a major resistance, support or Fibo level then probability of a successful trade based on divergence set-up on a lower time-frame at this point increases.
2. Reward to Risk Ratio: Gold Trading Money Management Rules
And finally, when looking for divergence, it's very important that you enter the trade correctly, so that you have a good risk/reward ratio & only open xauusd transactions that have more profit potential than what you are risking. If you understand how to enter a trade properly, you can measure your risk/reward before you open a transaction. That way, you can only choose to open orders that offer a favorable ratio.
Finally, when used correctly and combined with other xauusd technical indicators to confirm this xauusd signal, divergence set-up can offer huge profit potential.
