Stochastic Oscillator Bullish XAUUSD Divergence & Bearish Divergence XAUUSD

Divergence xauusd is one of the signals that can be generated when using the stochastic oscillator indicator.

Divergence xauusd is a signal that a rally or retracement is losing steam and is likely to reverse. It means that the last buyers or the last sellers are pushing the price in one way while the majority of other traders have stopped trading in that direction and are cautious of a price correction or retracement.

There are 4 types of divergence trading setups

Example 1: Classic Bullish Divergence Setup

A XAUUSD Classic Bullish Divergence in the stochastic oscillator indicator & the price is followed by a rise in price.

Stochastic Oscillator Indicator Classic Bullish Divergence

When the price is making new lows the Stochastic indicator is not moving past its previous lows it is an indication that the downward trend is about to reverse and a bullish xauusd rally is likely to occur.

In the above example the price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator indicator, when the price formed a new low then the stochastic indicator should have followed suit, but the stochastic indicator did not therefore the classic divergence trade setup.

Gold classic divergence trading setup is even stronger because there is combination of a divergence trade setup and then followed by a rise above the 20% indicator level. This combines the Overbought & Oversold levels with this divergence trade setup.

Example 2: Classic Bearish Divergence Setup

A Classic Bearish Divergence trading setup in the stochastic oscillator indicator & the price is followed by a drop in price.

Stochastic Indicator Classic Bearish Divergence

When price is making new highs but the Stochastic oscillator indicator is not moving beyond its previous high it is an indication the upward trend will reverse and that a bearish divergence trade setup will follow.

This classic bearish divergence trade setup is even stronger because there is a combination of a divergence with a dip below the overbought 80 level.

Example 3: Hidden Bullish Divergence Setup

Hidden Bullish Divergence trade setup signifies a retracement in an upwards trend. This hidden divergence trading setup is the best type of divergence setup to trade, because you are not trading a price reversal, but you're trading within the direction of the market trend.

Stochastic Indicator Hidden Bullish Divergence

Even though, the stochastic oscillator indicator made a lower low the price low was higher than the previous low (higher low). This means that even though the bears made a good attempt to push price down as indicated by the stochastic indicator, this was not reflected on the price, & the price did not make a new low. This is the best place to open a buy trade, since it's even in an up-ward trend there no need to wait for a confirmation signal, because you are buying in an up-ward trend.

Example 4: Hidden Bearish Divergence

Hidden Bearish Divergence setup signifies a retracement in a downwards trend.

Stochastic Indicator Hidden Bearish Divergence

Hidden bearish divergence setup is the best type of divergence to trade, because you are not trading a price trend reversal, but you're trading within the direction of the market trend. This is the best place to open a sell trade, since it is even in a downward trend there no need to wait for a confirmation signal, because you are selling in a downward trend.