Hidden Bullish & Hidden Bearish Divergence Gold

Hidden divergence is used by traders as a possible sign for a price 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's 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 technical 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 and shown below illustrates image screenshot of this xauusd formation, from the screen-shot the price made higher low (HL) but the technical indicator made a lower low (LL), this illustrates that there was a diverging signal between the price & indicator. This signal displays that soon the market uptrend is going to resume. In other words it illustrates this was just a retracement in an upwards trend.

How Do I Identify Hidden Bullish & Hidden Bearish Divergence Setups?

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 technical is showing a higher high (HH). To remember them easily think of them as M shapes on Chart patterns. It forms when there's a retracement in a downward trend.

The example illustrated & shown below shows screenshot of this xauusd formation, from the screen-shot 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 illustrates this was just a retracement in a downwards trend.

How Do You Analyze Divergence Setup Trading Setup?

This confirms that a price retracement move is complete and indicates the under-lying momentum of a downward trend.

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

However, a gold 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.

Crossover Method Buy and Sell Signals MA Crossover Strategy

MA Cross over 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 cross-over trading method to give an upward crossover signal, while for a bearish diverging setup wait for the moving average cross-over trading strategy to give a downwards bearish cross over signal.

By combining this signal with other indicators this way one will avoid fake outs in trading this signal.

Combining with Fibonacci Retracement Levels

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

Because the hidden divergence setup is just a price retracement in an upward trend we can combine this signal with the most popular retracement tool that is the Fibonacci 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.

How to Identify Hidden Bullish and Hidden Bearish Divergence Setups

Combining with Fibo Extension Levels

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

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

How Do I Identify Hidden Bullish and Hidden Bearish Divergence Setups? - Fib Expansion Levels PDF

For this example there were three take-profit levels:

Expansion Level 61.80% - 131 pips profit

Extension Level 100.00 % - 212 pips profit

Extension Level 161.80 % - 337 pips profit

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

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