Indices with Divergence on MetaTrader 4 MT5 PDF Free Download

Divergence Setup is one of the trade setups used by traders. It involves looking at a stock chart & one more stock indicator. For our example we shall use the MACD indicator.

To spot this divergence trading setup find two chart points at which price makes a new swing high or a new swing low but the MACD indicator doesn't, indicating a divergence between stock trading price and momentum.

To look for divergence stock trading setup we look for 2 chart points, two highs that form an M-shape on the stock chart or two lows that form a W-Shape on the stock chart. Then look for same M-shape or W-Shape on the stock indicator you use to trade.

Example of a Divergence Trade Setup:

In the stock chart below we spot two chart points, point A & point B (swing highs). These two chart points form an M-shape on the stock price chart.

Then using MACD indicator we check highs made by MACD technical indicator, these are highs that are directly below Chart points A and B.

We then draw one line on the stock chart and another line on the MACD technical indicator.

Drawing Divergence Lines

The stock chart above highlights example of one of the four types of stock trade divergence setups, the one stock divergence setup above is known as hidden bearish divergence trading setup, one of the best type to trade. Types of trading divergences are covered in the next learn guide lesson.

How to spot stock trade divergence setups

In order to identify divergence signal we look for the following:

• HH=Higher High- two highs but the last one is higher
• LH= Lower High- 2 highs but the last one is lower
• HL=Higher Low- 2 lows but the last one is higher
• LL= Lower Low- 2 lows but the last one is lower

First let us look at the illustrations of these stock divergence trading terms:

M-shapes dealing with price Highs

W-Shapes dealing with price lows

Example of M Shapes on Charts

Examples of W Shapes on Charts

Now that you have learned the stock divergence trading terms which are used to explain divergence trading set-up. Let us look at the two types of divergences and how to trade these stock chart setups.

There two types are:

1. Classic Divergence Setups

2. Hidden Divergence Setups

These 2 setups are described on following guides below

Classic Divergence Setup

Hidden Divergence Setup

Indices with Divergence on MetaTrader 4 MT5 PDF Download - Indices with Divergence on MetaTrader 4 MT5 Platform PDF Free Download - MetaTrader 4 Platform MT5 Divergence Guide.