Divergence Trading Tips

August 28, 2012


Divergence Trading Tips

Divergence trading is one of the popular strategies utilized by traders to trade trend changes. You can use stochastics in trading divergences. A divergence occurs when the price is going up but the indicator is going down within the opposite direction or the indicator is going up and the price action is going down within the other direction.

Now, keep this in thoughts that divergence on a every day chart is fairly various than the divergence on the weekly chart. Divergence on the daily chart indicates that the price will make a short term counter trend move within the subsequent one to five days.

But a divergence taking location on the weekly charts indicates something more powerful. It means an intermediate trend change, something more potent than a short term counter trend move on the every day charts.

Now, when a divergence takes place either on the daily chart or the weekly chart, it does not mean that the trend change will take place instantly. You cannot simply buy and sell on spotting a divergence.

But when %K line changes direction but is unable to cross the %D line before altering its direction back to the original direction, ignore this signal.

And in case, you’re not in a trade and also you spot a divergence developing on the weekly charts, get ready to enter into a trade in the direction that the divergence is predicting the major retracement.

Divergence trading is some thing you should master. Numerous traders trade divergences and are able to make great earnings.

Suppose, you’re in a trade whenever you spot a divergence appearing on the Stochastics. Take profit for now by exiting half from the position. Now, when the stochastics divergence works, use the upside crossover to trigger a reentry purchase order.

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