Hidden divergence trading .pdf
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Hidden divergence trading
Usually forex traders use Stochastic as general or additional overbought / oversold oscillator. Stochastic, a very useful
oscillator and can be extremely useful in both trending and ranging markets.
This indicator is calculated with the following formula:
%K = 100[(C ‐ L14)/(H14 ‐ L14)]
C = the most recent closing price
L14 = the low of the 14 previous trading sessions
H14 = the highest price traded during the same 14‐day period.
%D = 3‐period moving average of %K
However another alternate use for Stochastics oscillator in trending markets can be to spot hidden
To start assessing hidden divergence in an uptrend we have to start with determining the present lows of price. In an
uptrend, our lows must be advancing making greater short of the chart. Next,we should compare Stochastics for the
exact same duration. Marked below we can see the indicator developing a collection of lesser lows. This is hidden
divergence! Most easy way is using stochastic divergence indicator with hidden divergence option.
Now that hidden divergence is discovered, trader will commonly continue to perform on either a crossover or return
from oversold worths in expectations that the trend will transfer to greater highs.
Instead Stochastic you can use John Ehlers FisherTransform Divergence Indicator with hidden divergence option.
This indicator shows more trend confirming signals and signal appear early then on Stochastic.
Stochastic and John Ehlers FisherTransform Divergence Indicator with hidden
You can activate or deactivate hidden or standard divergence option using external parameters.
Using indicator with active standard divergence, you can determine market reversal points. Using indicator with active
hidden divergence, you can determine the continuation of a trend. I can recommend you to combine standard/hidden
divergence indicators with support/resistance indicator. This indicator helps not only to refine the entry and exit levels
and find levels for Stop Loss and Take Profit orders.