What's Stochastic Indices Divergence?

Stochastic Divergence Indices is one of the trading strategy used by online traders to analyze indices chart stock indices price movement. Stochastic Indices Divergence involves looking at a stock indices chart & one more stock indices technical indicator - Stochastic indicator. For our this trade divergence tutorials we shall use the Stochastic indicator - Stochastic Stock Indices Divergence.

To spot this Stochastic indices divergence setup find 2 chart points at which price makes a new swing high or a new swing low but the Stochastic indicator does not do the same, thus indicating that there is a divergence between the price and momentum.

Stochastic Indices Divergence Example:

In the chart below we spot 2 chart points, chart point A and chart point B ( swing highs )

Then using Stochastic indicator we check the highs made by the Stochastic indicator, these are highs which are directly below the Chart points marked A and B.

We then draw one line on the chart and another line on the Stochastic indicator.

Stochastic Indices Divergence Meaning - Bullish Divergence Stochastic - Bearish Divergence Stochastic - Stochastic Divergence Guide

How to trade Stochastic indices divergence

In order to trade Stochastic indices divergence setup we look for the following setups:

HH - Higher High - 2 highs but last one is higher

LH - Lower High - 2 highs but last one is lower

HL - Higher Low - 2 lows but last one is higher

LL - Lower Low - 2 lows but last one is lower

First let us look at examples of these indices trade divergence terms

Stochastic Divergence Guide

Stochastic Stock Indices Divergence Definition - Stochastic Divergence Indices Guide - Stochastic Indices Divergence Strategy Course - Stochastic Divergence Indices PDF

There are two types of indices Stochastic divergence setups:

1. Stochastic Classic Divergence
2. Stochastic Hidden Divergence