Classic Bullish and Bearish Divergence PDF
oil classic divergence is used as a possible signal for a Oil Trading trend reversal and is used by crude oil traders to analyze crude oil price movement and identify areas where the crude oil price could reverse and start going in the opposite direction. Crude Oil Trading classic divergence setup is used as a low risk entry method when opening a oil trade or when exiting a oil trade transaction.
Classic divergence oil strategy is a low risk method to sell near the crude oil market top or buy near the crude oil market bottom, this makes the trading risk on your trades are to be small relative to potential reward. However, this classic divergence oil trading strategy is one method with very many whipsaws and most traders do not recommend using it.
Divergence in Oil Trading is also used to predict the optimum point at which to exit an open oil trade. If you already have an open oil trade that is already profitable, a good method to identify a profit taking level would be to use the point where you spot this divergence oil trading setup.
There are two different types of classic oil divergence, based on the direction of the current Oil Trading trend:
- Oil Classic Bullish Divergence
- Oil Trading Classic Bearish Divergence
Crude Oil Trading Divergence Scanner
Oil Trading classic bullish divergence forms when crude oil price is forming lower lows (LL), but the oil indicator is making higher lows (HL). The divergence oil example explained below shows classic oil divergence setup.
Oil Trading Classic Bullish Divergence - Crude Oil Trading Divergence Scanner - Oil Trading Classic Divergence Set Up Scanner
This crude oil trading divergence examples uses MACD indicator as a crude oil trading divergence indicator.
From the above oil divergence scanner example the crude oil price made a lower low(LL) but the MACD indicator made a higher low(HL), this shows there is a divergence between the crude oil price and the MACD indicator. This divergence oil signal warns of a possible oil trend reversal.
Classic bullish divergence oil signal warns of a possible reversal in the oil trend from downward trend to upward trend - because even though the crude oil price went lower the volume of sellers that moved the crude oil price lower was less as shown by the MACD technical indicator. This divergence oil signal indicates underlying weakness of the downward crude oil trend.
Oil Trading Divergence Scanner
Oil Trading classic bearish divergence forms when crude oil price is forming a higher high (HH), but the oil indicator is forming a lower high (LH). The oil divergence scanner example explained below shows an example of the classic bearish divergence oil trading setup.
Oil Classic Bearish Divergence - Crude Oil Trading Divergence Scanner - Oil Trading Classic Divergence Set Up Scanner
This divergence scanner oil example also uses MACD technical indicator
From the above example the crude oil price made a higher high(HH) but the MACD indicator made a Lower High(LH), this shows there is divergence between the crude oil price and the MACD indicator. This divergence oil signal warns of a possible oil trend reversal.
Classic bearish divergence oil signal warns of a possible reversal in the oil trend from upward trend to downward trend - this is because even though the crude oil price went higher the volume of buyers who pushed the crude oil price higher was less as illustrated by the MACD indicator. This signals underlying weakness of the upward crude oil trend.
In the example above, if you had used divergence setup to trade you would have gotten good trading signals to enter or exit the trades at an optimal point. However, divergence oil trading signals just like other crude oil indicators, is also prone to whipsaws. That is why it's always good for oil traders using this crude oil trading setup to confirm the divergence oil trading signals with other oil technical indicators such as RSI, Stochastic Oscillator and Moving Averages.
An good oil indicator to combine divergence oil signal with is the moving average technical indicator, in this moving average indicator a trader should use the Moving Average Crossover System - Moving Average Crossover Oil System and Divergence Oil Trading
Example of Moving Average Crossover Strategy
Once the divergence oil signal is given, a trader will then wait for the Moving average crossover crude oil trading system to give a oil signal in the same direction of the oil divergence signal, if there is a classic bullish divergence signal, a trader will wait for the moving average cross-over oil trading strategy to give an upward crossover oil signal, while for a bearish classic divergence oil signal the trader will wait for the Moving average crossover oil trading strategy to give a downward bearish crossover oil trading signal.
By combining the oil classic divergence signals with other technical oil indicators this way, a trader will be able to avoid oil whipsaws when it comes to trading the classic divergence oil signals, because the trader will wait until the oil trend has actually reversed and is already heading towards the direction of the divergence trade setup, hence the trader will not fall into the trap of picking market tops and market bottoms.
