How Do I Read Divergence Oil Trading Setup?
How Do You Interpret Divergence in Oil Trading? - Divergence crude oil trading setup is one of the oil trading strategy used by oil traders - divergence oil trading involves looking at a oil chart and one more oil indicator. For our oil divergence trading example we shall use the MACDÂ oil technical indicator.
To identify this oil divergence trading setup find 2 oil chart points at which he crude oil price makes a new swing high or a new swing low but the MACD indicator doesn't, thus illustrating a crude oil trading divergence between the crude oil price & momentum.
To look for divergence oil signal we look for 2 chart points on a oil chart - 2 crude oil price highs that form an M shape on the crude oil chart or two crude oil price lows that form a W Shape on the crude oil chart. Then look for the same M-shape or W-Shape on the crude oil indicator that you use to trade oil - for example RSI indicator or MACD oil technical trading indicator.
How Do You Read Different Types of Divergence Oil Trading Signals?
In the crude oil chart below we identify two oil chart points, chart point A & chart point B - swing highs. These two oil chart points form an M shape on the crude oil chart.
Then using MACD crude oil technical technical indicator we check highs made by MACD oil technical technical indicator, these are highs that are directly below Chart point Marked A and Chart point Marked B.
We then draw one line on the crude oil chart & another line on the MACD technical indicator.
How Do You Interpret Divergence Oil Trading Setup? - How Do You Read Divergence in Oil Trading?
The oil chart above shows an example of one of the 4 different types of oil divergence trading setups, the oil divergence setup above is known as hidden bearish oil trading divergence.
How to Read divergence oil trading setup
In order to Read divergence oil trading signal we look for the 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 - two lows but the last one is higher
- LL - Lower Low - 2 lows but the last one is lower
First let us look at the explanation of these oil divergence trading terms:
M shapes on Crude Oil charts
How Do You Interpret Divergence Oil Trading Setup? - How Do You Read Divergence in Oil Trading?
W Shapes on Oil charts
How Do You Interpret Divergence Oil Signals? - How Do I Read Different Types of Divergence Oil Trading Signals?
Example of M Shapes on Crude Oil Trading Charts
How Do You Interpret Divergence Oil Signals? - How Do I Read Different Types of Divergence Oil Trading Signals?
Examples of W Shapes on Oil Charts
How Do You Interpret Divergence Oil Signals? - How Do I Read Different Types of Divergence Oil Trading Signals?
Now that you have known the oil divergence trading terms used to explain divergence oil setup. There are 2 different types of oil trading divergences which are:
- Classic Oil Trading Divergence
- Hidden Oil Trading Divergence
Classic oil divergence setup and hidden oil divergence trading setup are described on the learn oil trading guides located in the main navigation menu of this learn oil trading website - under topics learn oil trading lessons.
How Do You Interpret Divergence Oil Trading Signals?
