Trade Stock Indices

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Stochastic Oscillator Bullish Indices Divergence and Bearish Divergence Indices Trading

Divergence indices trading is one of the indices trading signals that can be generated when using the stochastic oscillator stock indices indicator.


Divergence indices trading is a signal that a rally or retracement is losing steam and is likely to reverse. It means that the last buyers or last sellers are pushing the stock indexes price in one way while the majority of other indices traders have stopped trading in that direction and are cautious of a indices price correction or retracement.



There are four types of stock indexes trading divergence trading setups

Example 1: Classic Stock Indexes Bullish Divergence


A Indices Trading Classic Bullish Divergence in the stochastic oscillator indicator and the stock indexes price is followed by a rise in stock indexes price.

Stochastic Oscillator Indices Indicator Classic Stock Indexes Bullish Divergence

Stochastic Oscillator Indices Indicator Classic Indices Bullish Divergence


When the stock indexes price is making new lows the Stochastic stock indices indicator is not moving past its previous lows it is an indication that the downward indices trend is about to reverse and a bullish indices trading rally is likely to occur.



In the stock indexes trading example above the stock indexes price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator stock indices indicator, when stock indexes price formed a new low then the stochastic stock indices indicator should have followed suit, but the stochastic indicator did not therefore the indices trading classic divergence trading setup.


Indices classic divergence trading setup is even stronger because there is combination of a divergence indices trade setup and then followed by a rise above the 20% indicator level. This combines the Overbought and Oversold levels with this stock indexes trading divergence trading setup.


Example 2: Classic Indices Bearish Divergence


A Classic Indices Bearish Divergence trading setup in the stochastic oscillator stock indices indicator and the stock indexes price is followed by a drop in stock indexes price.

Stochastic Oscillator Indices Indicator Classic Stock Indexes Bearish Divergence

Stochastic Oscillator Indices Indicator Classic Indices Bearish Divergence


When stock indexes price is making new highs but the Stochastic oscillator stock indices indicator is not moving beyond its previous high it is an indication the upward indices trend will reverse and that a indices trading bearish divergence trade setup will follow.


This classic indices trading bearish divergence trade setup is even stronger because there is a combination of a stock indexes trading divergence with a dip below the overbought 80 level.


Example 3: Hidden Stock Indexes Bullish Divergence


Hidden Indices Bullish Divergence trade setup signifies a retracement in an upward indices trend. This indices trading hidden divergence trading setup is the best type of stock indexes trading divergence setup to trade, because you are not trading a indices price reversal, but you are trading within the direction of the Indices trend.

Stochastic Oscillator Indices Indicator Hidden Stock Indexes Bullish Divergence

Stochastic Oscillator Indices Indicator Hidden Indices Bullish Divergence


Even though, the stochastic oscillator stock indices indicator made a lower low the stock indexes price low was higher than the previous low (higher low). This means that even though the indices sellers made a good attempt to push stock indexes price down as indicated by the stochastic indicator, this was not reflected on the stock indexes price, and the stock indexes price did not make a new low. This is the best place to open a buy indices trade, since it is even in an upward indices trend there is no need to wait for a confirmation indices trading signal, because you are buying in an upward Indices trend.



Example 4: Hidden Indices Bearish Divergence


Hidden Indices Bearish Divergence trading setup signifies a retracement in a downward indices trend.

Stochastic Oscillator Indices Indicator Hidden Stock Indexes Bearish Divergence

Stochastic Oscillator Indices Indicator Hidden Indices Bearish Divergence


Hidden indices trading bearish divergence stock indexes trading setup is the best type of divergence to trade, because you are not trading a indices price indices trend reversal, but you are trading within the direction of the indices trend. This is the best place to open a sell indices trade, since it is even in a downward indices trend there is no need to wait for a confirmation indices trading signal, because you are selling in a downward Indices trend.

 

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