Divergence and hidden Divergence

Hello,

I trade forex for almost 1 year, not consistently, but now I'd like to do that. I've heard so many times about divergence and hidden divergence on the MACD indicator. But I haven't found much information about what that really means.

Can anyone shortly explain what these types of divergences are and what they means? Hope this question is not too noob'ish.
Best would be with a chart to show. Thanks.

Been using this stuff alot in the past, best resources are on nqoos site:

http://www.trading-naked.com/Divergence.htm
http://www.dacharts.com/NQoos.php

Take a look at this

Especially in lower time frame, we may experience a situation where bearish regular divergence and bullish hidden divergence (or bullish regular divergence and bearish hidden divergence) happen almost at the same time like the following. When this happens, my action will be stay out of the market. Fortunately, this situation rarely happen in high time frame like D1.

Haven't used divergences in a while, interested.
Does the TL in the separate window help any? It seems to go along with the TL's in the main chart, the middle one of which did well over the next day.

I'm actually backtesting on divergence as of now...

here's my cheat sheet version:

1. If u see an uptrend on the chart and there's a divergence on the "tops"-
it's a reversal
2. if u an uptrend and divergence on the "bottom 2 points"- it's a continuation

3. downtrend on chart with divergence on "bottom points" - reversal
4. downtrend on chart with divergence on "top points" - continuation

I use stochastic on 4H TF - so far has gone 130 trades with satisfactory result, however, averaging on 5-8 setups/month

we'll see how I go then... good luck there!

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hi again
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Thanks mate

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I personally have found the Stochastics set at 8,3,3, to show divergences much better than MACD or RSI, Look at the attached chart stochastics is showing both Regular divergence and Hidden Divergence, where as MACD has not shown either.

The choice of what you use is really a matter of personal preference. But put both on a chart on your preferred time frame and see which you prefer.


The attached PDF will give you a nice simple explanation of Divergence with clear chart examples.

thanks
dee50 i will try it

lets make some pips

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