Stochastic Oscillator Bullish XAUUSD Divergence and Bearish Divergence XAUUSD

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

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 & 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.

Stochastic Oscillator Classic Bullish Divergence

When the price is making new lows the Stochastic is not surpassing its previous lows it's an indication the downward trend is about to turn and reverse & a bullish xauusd rally is likely to occur.

In the above example the 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 formed a new low then the stochastic technical indicator should have followed suit, but the stochastic indicator did not therefore the classic divergence trade setup.

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

Example 2: Classic Bearish Divergence Trade Setup

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

Stochastic Trading 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 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, & 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'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

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

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