Divergence Crude Oil Trading Setups

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 technical indicator. For our divergence trading example we shall use the MACD oil technical indicator.

To spot this  crude oil divergence setup find two 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, two highs that form an M shape on the oil chart or two lows that form a W-Shape on the crude oil chart. Then look for the same M-shape or W-Shape on the Oil Trading indicator that you use to trade - for example RSI indicator, MACD indicator or Stochastic Oscillator technical indicator.

Example of a Oil Divergence Setup Trade Setup:

In the oil chart below we identify 2 chart points, point A and point B (swing highs). These 2 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 the Chart points A and B.

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

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

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

How to 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 - 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 illustrations of these divergence oil trading terms:

M shapes on Crude Oil charts dealing with 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 have learned the divergence oil trading terms which are used to explain divergence trading setup. Let us look at the 2 types of oil trading divergences and how to trade these oil divergence 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 explained on the following learn oil tutorials in the oil lessons tutorials on this website located at the navigation menu under the topics learn oil trading lessons.