Bullish and Bearish Hidden Divergence
Forty Third session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session Bullish and Bearish Hidden Divergence will be studied.
Hidden Divergence
One of the most significant issues that traders do not consider is Hidden Divergence.
Hidden Divergence is formed agreeing with a market trend, thus it indicates a suitable price to place an order.
Unlike Divergence and Convergence, it is recommended that trader places an order based on Hidden Divergence.
Even after multiple practices it would be hard to detect Hidden Divergence in a chart, hence most of the traders do not exploit it.
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Hidden Divergence in a Bullish trend: If a recent valley is higher than an earlier valley in a market trend, and a recent valley is lower than an earlier valley in an Oscillator, then a Hidden Divergence on a Bullish trend has formed.
Hidden Divergence in Bearish trend: If a recent peak is lower than an earlier peak in a market trend, and a recent peak is higher than an earlier peak in an Oscillator, then a Hidden Divergence on a Bearish trend has formed.
MACD, RSI and AO are the best oscillators to detect a Hidden Divergence on a market trend.
Trader can download customized AO from PForex.com, which is enhanced for higher utility.
Traders can insert AO, Awesome Oscillator, from Bill Williams’ option of the Indicator menu.
Trader can insert level 0 from AO properties window.
For example, there are some peaks over level 0 on AO chart with equivalent market trend peak.
If peaks are connected by a Trendline, line on a market chart has a descending slope, while line on AO chart has an upward direction.
Thus a Hidden Divergence has formed on this region, which indicates after each peak on a downtrend, market has gathered enough potential for further downward trend.
Another example of a Hidden Divergence on a Bullish trend. The valleys of the market and AO trends are connected with Trendline.
Trendline has an upward direction in the market, while Trendline on AO chart has a decreasing slope.
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This Hidden Divergence confirmed more upward trend after it has formed.
On this uptrend after short declines, a powerful potential for an ascending trend has formed.
Another Hidden Divergence just before this example has formed, too.
In spite of the fact that it is difficult to detect a Hidden Divergence, it shows a great opportunity for a successful order.
These examples were drawn by hand, however, the customized AO available on PForex.com draws all Hidden Divergence automatically.
Trader can change the timeframe to identify more Hidden Divergence on a market.
For example, there was a very good spot to place an order which was hard to identify for a trader.
Another example on a wide range, a Hidden Divergence has formed which could not have been detected if customized AO was not used.
On the Gold chart, from 2001 to 2014 a Hidden Divergence has formed that is drawn automatically by customized AO.
More examples can be studied to develop the ability to detect Hidden Divergence on a market.
Traders can combine Hidden Divergence with other patterns and conditions to detect appropriate points.
There are some useful remarks for traders:
- Some reversal patterns, such as Head and Shoulder, Double Top and Bottom, Triple Top and Bottom or a Wedge, can confirm a Hidden Divergence to place a successful order.
- Overbought and Oversold can confirm the preferred order derived from a Hidden Divergence.
- Hidden Divergence confirms that trader must place the order which has agreeing direction with market trend.
- If there is a short reversal swing on a long trend, Hidden Divergence can be exploited to detect points for placing orders with agreeing direction with the long trend.
- Continuation candles can confirm the Hidden Divergence signals.
- Fibonacci pattern can be exploited to derive confirmation on Hidden Divergence signals.
- Support and resistance lines can be exploited to obtain confirmation on Hidden Divergence signals.
That concludes this session, until next time and another session take care.