Hidden Bullish Divergence vs Hidden Bearish Divergence - Hidden Divergence Trading

Hidden Bullish Divergence vs Bearish Divergence

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

Hidden Bullish Trade Divergence

This pattern occurs when price is making a higher low ( HL ), but the oscillator technical indicator is displaying a lower low ( LL ). To remember these setups easily think of the set-ups as W-shapes on Charts. It forms when there a price retracement in an upwards trend.

The example below shows an screen shot of this formation, from the screen-shot the price made higher low ( HL ) but the trading indicator made a lower low ( LL ), this displays that there was a divergence signal between the price & indicator. This signal displays that soon the market uptrend is going to resume. In other words it portrays this was just a retracement in an up-trend.

How to Identify Hidden Bullish Trade Divergence & Hidden Bearish Trade Divergence Setup

This confirms that a market price retracement move is exhausted & indicates the underlying momentum of an up-trend.

Hidden Bearish Trade Divergence Setup

This pattern occurs when price is forming a lower high (LH), but the oscillator trading is showing a higher high (HH). To remember these setups easily think of these setups as M shapes on Chart patterns. It forms when there a retracement in a downwards trend.

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

How to Identify Hidden Bullish Trade Divergence & Hidden Bearish Divergence

This confirms that a market price retracement move is exhausted and indicates underlying strength of a down-trend.

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

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

However, a forex trader should combine this setup with another indicator like the stochastic oscillator or MA and buy when the currency is over-sold, & sell when the currency is overbought.

Combining Hidden Divergence Setup with Moving Average Crossover Strategy Method

A good indicator to combine these setups is the Moving Average using MA cross over trading method. This will create a good trade strategy.

MA Crossover Strategy Method

Moving Average Crossover Technique

In this method, once the signal is given, a trader will then wait for the MA 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 MA cross over trading system to give an upwards crossover signal, while for a bearish divergence pattern wait for the Moving Average cross-over trading method to give a downwards bearish crossover signal.

By combining this signal with other technical indicators this way a trader will avoid whip-saws in trading this signal.

Combining with Fibonacci Retracement Levels

For this example we will use an upwards market trend. The currency pair is GBPUSD. We shall use the MACD.

Because the hidden divergence pattern is just a retracement in an upward trend we can combine the trading signal with the most popular retracement tool that's the Fib retracement levels. The example below displays that when this set-up appeared on the trading chart, the price had just hit 38.20% level. When price tested this level, this would have been a good level to open a buy order on the GBPUSD currency.

Hidden Bullish Divergence on Upwards Trend Combined with Fib Retracement Levels

Combining with Fibo Expansion Levels

In the above example once the buy trade was placed, a forex trader would then need to calculate where to set the tp order for this position. To do this one would need to use the FX Fibo Expansion Levels.

The Fib extension was drawn as illustrated and shown on chart as shown & illustrated below.

Fib Expansion Combined with Hidden Bullish Divergence

For this example there were three tp order areas:

Expansion Level 61.80 % - 131 pips profit

Expansion Level 100.00 % - 212 pips profit

Extension Level 161.80% - 337 pips profit

From this strategy combined with Fib indicator would have provided a good strategy with a good amount of profit set using the take profit order levels.

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