Trading Oil Interpret Divergence Oil Trading and Trade Divergence Setups in Oil Trading

Crude Oil Trade Divergence Oil Trading and Trade Divergence Setups in Oil Trading

Divergence Oil Trading Definition - Divergence oil trading is one of the oil trading setups used by Oil traders. Divergence oil trading involves looking at a oil chart and one more oil indicator. For our divergence crude oil trading example we shall use the MACD oil trading technical indicator.

To spot this  crude oil trading divergence setup find two oil chart points at which trading crude oil price makes a new swing high or a new swing low but the MACD indicator does not, indicating a crude oil trading divergence between crude oil price & momentum.

To look for divergence oil signal we look for 2 chart points, 2 highs that form an M shape on the oil chart or two lows that form a WShape on the crude oil chart. Then look for the same M-shape or W-Shape on the oil indicator that you use to oil trade - for example RSI indicator, MACD indicator or Stochastic Oscillator indicator.

Example of a Crude Oil Trading Divergence Trade Setup:

In the oil chart below we identify two oil chart points, point A and point B (swing highs). These two chart points form an M-shape on the trading crude oil price chart.

Then using MACD technical indicator we check the highs made by the MACD technical indicator, these are the highs that are directly below oil Chart points A and B.

We then draw one line on the oil chart & another line on the MACD indicator.

Drawing Divergence Oil Trading Lines - Divergence Oil Strategy - Divergence Oil Trading Entry & Exit

The oil chart above shows example of one of the 4 types of crude oil divergence setup, one above is known as hidden bearish oil divergence. Types of crude oil trading divergence setups are covered in next learn oil trading lesson.

Trading Oil spot divergence oil trading setup

In order to spot Crude Oil Trading divergence signal we look for following:

• HH - Higher High - 2 highs but the last one is higher
• LH - Lower High - 2 highs but the last one is lower
• HL - Higher Low - 2 lows but the last one is higher
• LL - Lower Low - 2 lows but the last one is lower

First let us look at the illustrations of these divergence oil trading terms:

M shapes on Oil charts dealing with Crude Oil price Highs

W Shapes on Oil charts dealing with Crude Oil price lows

Example of M Shapes on Oil Trading Charts

Examples of W Shapes on Crude Oil Charts

Now that you've learned the divergence oil trading terms which are used to explain divergence oil set-up. Let us look at the 2 types of oil trading divergences and how to oil trade these divergence oil chart setups.

The two oil divergence types which are:

1. Classic Oil Trading Divergence
2. Hidden Oil Trading Divergence

These two crude oil trading divergence setups - classic oil divergence trading & hidden oil divergence trading are described on the learn oil guides in the oil lessons tutorials on this learn oil trading website located at the navigation menu under the topics learn oil trading lessons.

How to Crude Oil Trade Divergence Oil Trading and Trade Divergence Setups in Oil Trading