Hidden divergence

haha .....
just saw this from an ex tier 1 bank chief dealer.
https://www.forexfactory.com/showthr...4#post12781914

gold anyone?
after price closed below yesterday's low.

Hi Chamane,
Is that possible that EURUSD and USDCHF both follow Bearish Hidden Divergence? usually these two pairs moves on opposite direction ...

I would be surprised if the situation occurs on the same timeframe, especially if the two pairs are strongly inversely correlated. You can check the correlation coefficient between the two pairs for a given TF and see if the value is more than +75% (strong positive correlation) or less than -75% (strong negative correlation). If there is a strong negative correlation between the pairs, the odds of having both a bearish or bullish divergence at the same time on the same timeframe are very thin. I am not saying it can't happen because a correlation is never 100%. I would not bother the correlation if the situation you describe happens. Remember that divergence is a only a headsup of momentum change and you need other convergence signs before entering a trade. I am pretty sure one pair will show stronger entry signs than the other along the way.

I happened to check the correlation coefficient a couple of times when I had a HD divergence pattern on a high spread currency pair like the GBPNZD. I would then trade the other correlated pair with a lower spread even if there no divergence pattern shown.

I would suggest you trade with a Cost Averaging approach (like I do oftentimes) with the two pairs if you get contradictory entry signs on both. That way should optimize your results.

Some of the most obvious Hidden Divergence patterns that occured on the 4 HR timeframe this past week.

gn hd rd

AUDCAD. Getting ready for next week.

AUDNZD.
Hidden Divergence pattern on the Weekly chart.
Start of a Trading Zone on the Daily.
Waiting for price to cross the dotted support line. The last candle on the 2HR chart is a bearish engulfing.

gj hd

gold hd

Chamane,
GBPJPY has formed HD on Monthly TF
waiting for MACD signal to cross the zero

Yes, this is a case I am following. For me, it is safer to wait for MACD to cross the zero line because there can be some retracement after the last big candle. After the cross of the zero line (if it ever happens), I will then check entries on the 16 HR chart in the Trading Zone. With those high timeframes, we need patience.

gn hd hd

gn. don't hold longer than necessary for the tide can turn any moment.

gj hd rd

gold. small candle means loss of momentum or rest and continue?

higher time frame gives a better picture.
support broken turned into resistance.

1. Bearish Hidden Divergence pattern developing on the 4 HR chart.
2. Bearish Regular divergence on the 1 HR chart. Start of a Trading Zone.
3. Waiting for bearish signals in the Trading Zone on the 5 min timeframe.

AUDJPY. Same as above.

1. HD pattern on the 4 HR chart.
2. Regular divergence on the 1 HR chart. Waiting for an entry signal or the start of a Trading Zone.