Hidden Bullish & Hidden Bearish Divergence Gold

Hidden divergence is used by traders as a possible sign for a trend continuation after the price has retraced. It's a signal that the original trend is resuming. This is best setup to trade because it is in same direction as that of the continuing market trend.

XAUUSD Hidden Bullish Divergence

This setup occurs when price is forming a higher low ( HL ), but the oscillator (indicator) is displaying a lower low ( LL ). To remember them easily think of them as W-shapes on Chart patterns. It forms when there is a retracement in an upward trend.

The example illustrated & shown below shows an image of this xauusd formation, from the image the price made higher low (HL) but the technical indicator made a lower low (LL), this portrays that there was a diverging trade signal between the price & indicator. This signal displays that soon the market up trend is going to resume. In other words it portrays this was just a retracement in an upward trend.

This confirms that a price retracement move is complete & illustrates underlying momentum of an upward trend.

Gold Hidden Bearish Divergence

This setup occurs when price is forming 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 forms when there is a retracement in a downwards trend.

The example illustrated & shown below shows an image of this xauusd formation, from the image the price made a lower high (LH) but the technical indicator made a higher high (HH), this portrays that there was a divergence between the price and the indicator. This portrays that soon the market down trend is going to resume. In other words it portrays this was just a retracement in a downward trend.

This confirms that a price retracement move is complete & indicates underlying momentum of a downwards trend.

Other popular technical indicators used are Commodities Channel Index indicator (CCI), Stochastic Indicator, RSI and MACD. MACD & RSI are the best indicators.

NB: Hidden divergence pattern is the best type divergence pattern to trade because it gives a trading signal that's in the same direction with the current price trend, thus the setup has a high reward to risk ratio. It provides for best possible entry.

However, a trader should combine this setup with another indicator like the stochastic oscillator or moving average & buy when the xauusd is oversold, and sell when the xauusd is overbought.

Combining Hidden Divergence Pattern with Moving Average Crossover Method

A good technical indicator to combine these setups is the moving average indicator using moving average crossover method. This will create a good trading strategy.

Moving Average Crossover Method

In this method, once the trading signal is given, a trader will then wait for the moving average cross-over technique to give a buy/sell signal in the same direction, if there is a bullish divergence set up between the price & indicator, wait for the moving average crossover system to give an upwards cross-over signal, while for a bearish diverging setup wait for the moving average crossover strategy to give a downward bearish crossover signal.

By combining this signal with other technical indicators this way one will avoid whip-saws when it comes to trading this trading signal.

Combining with Fib Retracement Levels

For this example we shall use an upwards market trend. We shall use the MACD indicator.

Because the hidden divergence setup is just a price retracement in an up-wardupwards trend we can combine this signal with the most popular retracement tool that is the Fib retracement levels. The example illustrated & shown below displays that when this setup appeared on the chart, the price had just hit 38.20% level. When price tested this level, this would have been a good level to set a buy order.

Combining with Fibo Expansion Levels

In the example above once the buy trade was placed, a trader would then need to calculate where to set the take profit for this trade. To do this a trader would need to use the XAUUSD Fibo Expansion Levels.

The Fibo expansion was drawn as illustrated and shown on the trading chart as illustrated & shown below.

For this example there were three take profit levels:

Expansion Level 61.80% - 131 pips profit

Expansion Level 100.00% - 212 pips profit

Expansion Level 161.80% - 337 pips profit

From this strategy combined with Fibo would have provided a good strategy with a good amount of profit set using these take profit areas.