Stochastics Oscillator Bullish XAUUSD Divergence and Bearish Divergence XAUUSD
Divergence in XAUUSD is one of the trading signals that can be produced when employing the stochastic oscillator.
Divergence xauusd is a signal that a rally or retracement is losing steam and is likely to reverse. It means 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 & are cautious of a price correction/retracement.
There are 4 types of divergence trade setups
Example 1: Classic Bullish Divergence Trading Setup
A XAUUSD Classic Bullish Divergence in the stochastic oscillator indicator and the price is followed by a rise in price.
Stochastics Oscillator Classic Bullish Divergence
New price lows with stochastic not matching signal a trend shift. An up rally in XAUUSD may follow.
In the above example price set a new low but it was not accompanied with a new low in the measure of the Stochastic oscillator indicator, when the price shaped a new low then the stochastic technical indicator should have followed suit, but the stochastic indicator didn't thenceforth the classic divergence trade setup.
Gold classic divergence trading set-up is even more reliable because it combines a divergence trade setup and a rise past the 20% trading indicator level. This combines the levels for when something is overbought or oversold with this divergence trade setup.
Example 2: Classic Bearish Divergence Trade Setup
A standard Bearish Divergence trading setup happens when the stochastic oscillator and the price are followed by a drop in the price.
Stochastic Trading Indicator Classic Bearish Divergence
When the price goes to new high points, but the Stochastic oscillator tool does not move past its earlier high point, this tells us the upward trend will change direction, and a bearish divergence trade setup will happen next.
This classic bearish divergence setup is even stronger because there is combination of divergence with a dip below the over-bought 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 pattern is the best type of divergence setup to trade, because you're not trading a price reversal, but you're trading within the market direction of the price 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, & price did not make a new low. This is the best place to open/execute a buy trade, since it's even in an up-ward trend there's no need for you to wait and chill for a confirmation trading signal, because you're buying in an upward trend.
Example 4: Hidden Bearish Divergence
Hidden Bearish Divergence setup signifies a retracement in a downwards trend.
Stochastic Trading Indicator Hidden Bearish Divergence
The hidden bearish divergence setup is arguably the superior divergence pattern for trading, primarily because the action involves trading *with* the existing market price trend, rather than attempting to trade a reversal. This configuration constitutes the ideal moment to initiate a sell transaction, as the market is already in a downward trend, eliminating the need to pause and wait for a subsequent confirmation signal before selling.
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