MACD Negative Divergence

Forex Divergence Strategy You Must Know

In the post today, I am going to share with you a forex divergence strategy that I find very reliable. Basically, the divergence strategy makes use of the differ results between the indicator and the market to trade. In this post, I am going to teach you 2 divergence techniques with 2 different indicators. Do […]

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    In the post today, I am going to share with you a forex divergence strategy that I find very reliable. Basically, the divergence strategy makes use of the differ results between the indicator and the market to trade. In this post, I am going to teach you 2 divergence techniques with 2 different indicators. Do note that this strategy works on all currency pairs and time frames.

    video tutorial

    Indicators Required:

    MACD Divergence Strategy

    I bet you must have heard of MACD divergence before. When you see that the market is making a higher high while the MACD indicator is making a lower high, it is what we call the negative divergence. Whenever you see this formation, it is a sign that the market is going to reverse from up to down.

    MACD Negative Divergence

    If you see that the market is making a lower low while the MACD indicator is making a higher low, this is what we call the positive divergence. Whenever you see this formation, it is a sign that the market is going to reverse from down to up.

    MACD Positive Divergence

    For both formation, you will only enter a trade when the MACD histogram flips over to the direction of the trade. For example, you see a positive divergence. You will only enter a trade when the MACD histogram flips from down to up. As for the stop loss and target profit, your stop loss will be at the most recent swing low. For the target profit, I will usually set it as 1:2 which is doubled your stop loss.

    Entry

    Stochastic Divergence Strategy

    Besides using the MACD indicator for divergence, I also use the Stochastic indicator to trade the divergence strategy.

    When you see that the market is making a higher high while the Stochasic indicator is making a lower high, it is a sign of negative divergence. Similar to the negative divergence on MACD, this is a sign that the market is going to reverse from up to down.

    Stochastic Negative Divergence

    So if you see that the market is making a lower low while the Stochastic indicator is making higher low, this is what we call the positive divergence and this is a sign that the market is going to reverse from down to up.

    Stochastic Positive Divergence

    To trade the Stochastic Divergence Strategy, you can wait for one line of the indicator to cross over the other line to enter a trade. The amount of stop loss and target profit stays the same as the MACD Divergence Strategy.

    The divergence strategy is something that is pretty reliable and has a very decent risk reward ratio. For those of you who has signed up for my free newsletter and has downloaded a copy of my “Secrets to Successful Trading”, you should have read from the book the importance of risk reward ratio.

    With a decent winning percentage and risk reward ratio, you will be able to generate consistent income for yourself every month without failed.

    Therefore this is one strategy that I will definitely recommend you to try. Before you trade live with it, you should always have the habit to trade a new strategy on a demo account first. You will only go live after you manage to see profit in your demo account.

    For better understanding, I have actually recorded a forex video tutorial for you

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