Trading Forex with Divergence on MT4 MT5 - Trading Divergence on MT4 MT5 Setups
Divergence Forex Trading Setup is one of the trade setups used by Forex traders. It involves looking at a forex chart & one more forex indicator. For our example we shall use the MACD forex indicator.
To spot this forex divergence trading setup find 2 chart points at which price makes a new swing high or a new swing low but the MACD indicator does not, indicating a divergence between forex price and momentum.
To look for divergence forex trading setup we look for 2 chart points, 2 highs that form an M-shape on the Forex trading chart or two lows that form a W-Shape on the trading chart. Then look for same M-shape or W-Shape on Forex trading indicator you use to trade.
Example of a Forex Trading Divergence Setup Trade Setup:
In the EURUSD forex chart below we spot two chart points, point A & point B (swing highs). These 2 chart points form an M-shape on the forex price chart.
Then using MACD indicator we check highs made by MACD technical indicator, these are highs that are directly below Chart points A and B.
We then draw one line on the Forex trading chart & another line on the MACD indicator.
Drawing FX Divergence Trading Lines
The forex chart above shows example of one of the four types of forex divergence trading setups, the one forex divergence trading set up above is known as hidden bearish forex divergence trading setup, one of the best type to trade. Types of forex trading divergences are covered in the next learn forex guide lesson.
How to spot forex trading divergence setups
In order to spot Forex divergence 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- two lows but the last one is higher
- LL= Lower Low- two lows but the last one is lower
First let us look at the illustrations of these forex divergence trading terms:
M-shapes dealing with FX Trading price Highs
W-Shapes dealing with price lows
Example of M Shapes on Forex Trading Charts
Examples of W Shapes on Forex Charts
Now that you have learned the forex divergence trading terms which are used to explain divergence forex trading set-up. Let us look at the two types of divergences and how to trade these forex chart setups.
There two types are:
- Classic Divergence Forex Trading Setups
- Hidden Divergence Forex Trading Setups
These two set ups are explained on following courses below
Classic Divergence Forex Trading Setup
Hidden Divergence Forex Trading Setup
Trading Forex with Divergence on MT4 MT5 PDF Download - Trading Forex with Divergence on MT4 MT5 PDF - MT4 MT5 Divergence Forex Guide.
