Hidden divergence

NZDJPY. HD developing on the 4HR chart. Looks like it will continue up.

BOOM !!

Hi guys. Did I draw the HD correctly?

cool brother!

Yep!!!

the price was under the cloud with a hidden div.

Securing the trades.

Good job, chamane!

Interesting story with EURJPY:

Anticipating during a 4 HR HD pattern, if price wants to go up.

Let's see how this one goes.

Thanks Chamane for posting these really nice set ups and for sharing your hidden divergences trading approach .... its very helpful !!!

It looks like you are entering trades based on the MACD signal line crossing the zero line which seems to coincide quite nicely with the retracement trendline / market structure breaking as well so this is great. My question then is about your stop loss placement. I would think that the stop loss should typically be placed above the most recent swing high / low on your lower timeframe chart (e.g. the H1 chart of GBPNZD) but maybe you are using an even smaller time frame to reduce your stop loss even more and therefore increase your risk reward?

For example, in the above chart, the stop loss on this GBPNZD trade from a H1 perspective, once the MACD signal line crosses zero would be quite large and therefore, this might adversely affect the R:R ratio on this trade. Im not sure if there is any way to improve the R:R any more i.e. being conservative and waiting for a proper market structure breakout may just mean that we get a lower R:R ratio?

I did see that you were trading from a M30 every now and then so I suppose Im asking if this is a standard approach or whether you switch it up, depending on the type of set up you are seeing?

Thanks very much ... MM

Hi MaitriMarty,
I use the MACD zero line cross for entry because I find it reliable. Oftentimes, it will confirm the direction of price after the cross of trendlines. And since trendlines are not always easy to draw, the cross of MACD helps me to make a decision.

And yes, I use the most recent swing high/low to place my stop loss. Using lower timeframes to enter allows us to lower our risk. Using the main TF (where we spot the HD pattern) to place our stop loss, it will give often a risk higher than 2%. I use a RR=1:1 and I bring my stop loss to breakeven (+few pips) whenever price reaches half the risk or so in profit. You can see an example in my most recent trades. I got stopped out with NZDCHF, but I reached my profit level with NZDJPY. I don't mind being stopped out with a small profit instead of a bigger loss.



I prefer trading in larger timeframes, there is less noise, and also I am not full time in front of the screen. I like 4 HR TF and up. For instance, spotting a hidden divergence pattern on a Daily chart would make me look at the 4 HR TF for entries. If you want to raise the RR ratio, you can use a cost averaging approach by going to an even smaller timeframe like the 30 min in a Trading Zone (see this post for an example). Use 2 units (lots), close one after RR=-1:1 and let the second one ride. As long as the 2 units total less than 2% of your capital.

Thanks so much for taking the time to respond Chamane and for sharing all of this great information .... it really helps :-)

I think someone already mentioned the H4 EURJPY HD .... weekly downtrend + daily momentum is flat + H4 HD + H1 RD .... lets see if price wants to breakdown from here .... only 24 hours until NFP though !!

Hey, Maitri! Do not use so many indies- it does not work.MACD is good to start to understand how HD and RD work.

One can take a look at this chart, make a guess and than add a few indies to check his guesses:

Looks like HD.

A HD pattern developing on EURCHF 4 HR chart. Let's see if price will bounce on the bottom of the channel or cross it on the 1 HR TF.

I noticed 8, 17, 9 MACD on H4 and 16, 34, 9 on H1. What does the change tell you?