How Do You Trade Forex Divergence Trading Setup?
How Do You Trade Divergence in Forex? - Divergence forex trading setup is one of the forex trading strategy used by traders - divergence forex trading involves looking at a forex chart & one more forex indicator. For our forex divergence example we shall use the MACD forex indicator.
To identify this forex divergence trading set up find two chart points at which he forex price makes a new swing high or a new swing low but the MACD indicator doesn't, thus illustrating a forex trading divergence between the forex price & momentum.
To look for divergence forex trading signal we look for 2 chart points on a forex chart - two price highs which form an M shape on the forex chart or two price lows that form a W-Shape on the forex chart. Then look for same M shape or W Shape on forex indicator that you use to trade forex - for examples RSI indicator or MACD indicator.
How Do You Trade Different Types of Forex Divergence Trading Signals?
In the forex chart below we identify two chart points, chart point A and chart point B - swing highs. These two chart points form an M shape on forex chart.
Then using MACD technical indicator we check the highs made by the MACD indicator, these are highs that are directly below Chart point A and Chart point B.
We then draw one line on the forex chart & another line on the MACD indicator.
How Do You Trade Forex Divergence Trading Setup?
The forex chart above shows an example of one of the four different types of forex divergence trading setups, the forex divergence set up above is known as hidden bearish forex divergence.
How to Trade divergence forex trading setup
In order to Trade divergence forex signal we look for following:
- HH - Higher High - two highs but the last one is higher
- LH - Lower High - two highs but the last one is lower
- HL - Higher Low - 2 lows but the last one is higher
- LL - Lower Low - two lows but the last one is lower
First let us look at the explanation of these forex divergence trading terms:
How to Trade Forex Price Highs
How Do You Trade Forex Divergence Trading Setup?
How to Trade Forex Price Lows
How Do You Trade Divergence Forex Trading Signals?
Example of M Shapes on Forex Charts
How Do You Trade Divergence Forex Trading Signals?
Examples of W Shapes on Forex Charts
How Do You Trade Divergence Forex Trading Signals?
Now that you have known the forex divergence trading terms used to explain divergence forex trading setup. There are 2 different types of forex trading divergences which are:
- Classic Forex Trading Divergence
- Hidden Forex Divergence
Classic divergence trading set up & hidden divergence trading set up are explained on the learn forex trading courses located in main navigation menu of this learn forex site - under topics learn forex trading lessons.
How Do You Trade Forex Divergence Trading Setup? - How Do I Trade Divergence in Forex?
