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 the price has retraced. It's a signal that the original and initial 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 forming/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 is a price retracement in an upward trend.

The exemplification laid-out below shows an screen shot of this setup formation, from the screen-shot the price made higher low ( HL ) but the indicator made a lower low ( LL ), this highlights that there was a divergence signal between the price & indicator. This signal highlights 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 and reflects the underlying momentum of an up-trend.

Hidden Bearish Trade Divergence Setup

This pattern occurs when price is forming/making 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 exemplification below illustrates and shows an image screen-shot of this setup, from the screen-shot the price made lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence pattern between the price and indicator. This highlights 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 & indicates underlying power of a down-trend.

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

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

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

Combining Together Hidden Divergence Setup with Moving Average Cross-over Strategy Method

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

MA Crossover Strategy Method

Moving Average Cross-over Technique

In this method, once the signal is generated, a trader will then wait out for the MA cross over technique to give a buy/sell signal in the same direction, if there's a bullish divergence set up between the price & indicator, wait out for the MA cross over system to give an upwards crossover signal, while for a bearish divergence pattern wait for the Moving Average crossover trading method to give a downwards bearish crossover signal.

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

Combining Together with Fibonacci Retracement Levels

For this example we will use an upward 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/liked retracement indicator that is the Fibo retracement levels. The exemplification below shows that when this setup 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 Fibonacci Retracement Levels

Combining with Fibo Expansion Levels

In the above exemplification once 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 Forex Fibo Expansion Levels.

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

Fib Expansion Combined with Hidden Bullish Divergence

For this exemplification there were 3 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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