Indices Trading With Divergence on MetaTrader 4 MetaTrader 5 PDF Free Download
Divergence Indices Trading Setup is one of the trade setups used by Indices traders. It involves looking at a stock indices chart and one more stock indices indicator. For our example we shall use the MACD indices indicator.
To spot this stock indexes trading divergence trading setup find two chart points at which stock indexes price makes a new swing high or a new swing low but the MACD stock indices indicator does not, indicating a divergence between stock indexes price and momentum.
To look for divergence stock indexes trading setup we look for two chart points, two highs that form an M-shape on the stock indices chart or two lows that form a W-Shape on the stock indexes trading chart. Then look for the same M-shape or W-Shape on the stock indices indicator you use to trade.
Example of a Indices Trading Divergence Trade Setup:
In the stock indices chart below we identify two chart points, point A and point B (swing highs). These two chart points form an M-shape on the stock indexes price chart.
Then using MACD stock indices indicator we check the highs made by the MACD indicator, these are the highs that are directly below Chart points A and B.
We then draw one line on the stock indices chart and another line on the MACD indices technical indicator.
Drawing Divergence Indices Trading Lines
The stock indices chart above shows an example of one of the four types of stock indexes trading divergence setups, the one stock indexes trading divergence trading setup above is known as hidden bearish stock indexes trading divergence trading setup, one of the best type to trade. Types of indices trading divergences are covered in the next learn indices trading tutorial lesson.
How to spot stock indexes trading divergence setups
In order to spot Indices Trading divergence trading signal we look for the following:
- HH=Higher High- two highs but the last one is higher
- LH= Lower High- two highs but the last one is lower
- HL=Higher Low- two lows but the last one is higher
- LL= Lower Low- two lows but the last one is lower
First let us look at the illustrations of these stock indexes trading divergence trading terms:
M-shapes dealing with stock indexes price Highs
W-Shapes dealing with stock indexes price lows
Example of M Shapes on Stock Indexes Charts
Examples of W Shapes on Stock Indexes Charts
Now that you have learned the stock indexes trading divergence trading terms that are used to explain divergence indices trading setup. Let us look at the two types of divergences and how to trade these stock indices chart setups.
There two types are:
- Classic Divergence Indices Trading Setups
- Hidden Divergence Indices Trading Setups
These two setups are explained on the following tutorials below
Indices Trading With Divergence on MetaTrader 4 MetaTrader 5 PDF Download - Indices Trading With Divergence on MetaTrader 4 MetaTrader 5 Indices Trading Platform PDF Free Download - MetaTrader 4 Indices Trading Platform MetaTrader 5 Divergence Indices Trading Tutorial.