Forexman

Divergence … Correct, hidden. This is a great tool and most importantly, it works. And works on all 100%. I think that would long ago have ruined, if it were not for this indicator. Such comments often enough you can see on the forums traders. Today I will try to bring some clarity and to show that the divergence - this is really the best indicator forex, which I know.

Divergence - this is the value for the testimony of a technical indicator. When the chart prices have higher maximum, and the graph of the indicator there is a lower maximum, that is, they do not match, in some cases it may be regarded as a divergence. My words are not yet sufficiently clear that in fact represents a divergence, but please be patient. Everything in order.

All indicators divergence Forex divided into bull and bear. Below I address each of them:

1. When the indicator on the chart have higher highs, and the chart price - lower or equal to the maximum, then it can be regarded as a bearish divergence. We see that the oscillator is ever further penetrate the overbought zone, but it is not to say that this will be sufficient to meet the cost of new highs.
2. When the chart prices have higher highs, and the graph of an oscillator - a lower or equal to the maximum, then such things at the market indicators of divergence Forex should be identified as bearish divergence. All this makes us know that the part of buyers is not observed activity, sufficient to cause the oscillator to rise in the overbought zone.
3. When the graph oscillators observed lower lows, but the price at this time is the same height or higher lows, then such a divergence is seen as bullish.
4. When the chart prices observed lower lows, and the graph of the oscillator there are equal or higher lows, it can be seen as a bullish divergence. The fall of prices to new lows not able to provide adequate pressure on the oscillator, in order to enable it to penetrate deeply enough into oversold zone.

There is another classification of divergences, in addition to a bull and a bear: correct and hidden.

Correct divergence - gives the best effect when the price tests passed strong levels: previous lows or highs. Such testing many traders call a double (triple) base (top). Often you can see how the price consistently makes 3.4 the maximum price, and indicators show divergence Forex 3.4 higher minimum. This feature is called the 3rd or 4 th regular divergence. All this tells us that the trend is significantly weakened and there is every reason to believe that he can turn around.

If during an uptrend there right divergence, then the foundation is laid for a comparison chart price peaks and maxima in the graph indicator. If during the downward trend observed divergence is correct, there is a basis for comparison of the minima laid on the chart price and lows on the chart indicator.

1. Bearish divergence


2. Bullish divergence

Hidden Divergence - quite often observed in the development of the trend. In such a divergence is expected to open transactions in the direction of the trend. When the market is hidden divergence, then the price usually moves to the last maximum or minimum oscillations. This will allow us to calculate the ratio of risk and potential profits from such transactions. In the event that between the point where the received signal and the last minimum or maximum fluctuation is too small a distance, it’s wise to omit such a deal.

Another signal that is fed a hidden divergence, and that means that you need to miss a deal would be the existence of the chart correctly divergence for the last minimum, when the market there is a downtrend for the last peak, when the market there is a downtrend. This behavior signals that the possibility of a change in trend in the near future.

Hidden divergence is the antithesis of the classical divergence. In the correct analysis of the divergence for the use of the lower minimum prices, which at the same time have higher values of the oscillator at the bottom of the market, as well as higher highs on price chart, when at the same time on the chart of the oscillator are observed lower values at the top of the market. A hidden divergence is observed at higher pricing minimums, as well as lower price highs, when at the same time have higher readings of indicators during the downtrend. In most cases, hidden divergence suggests the continuation of the trend.

1. Hidden bearish divergence


2. Hidden bullish divergence

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