Well, this time we will discuss again the hidden divergence
Hopefully, this article will be more specific and provide important points for your trading goals
In the article divergence cheat sheet, I have also mentioned about hidden divergence, maybe you can learn it again about the discussion about divergence
The condition of divergence is when there is a difference between the price and the oscillator indicator,
Usually, the indicator will move according to the price
But when there is a difference in this pattern it is called the divergence condition
Divergence is generally a sign that there will be a reversal of the trend
But the hidden divergence is a sign of a trend continuation
There are two hidden divergences, bearish and bullish hidden divergence patterns, each of them we will discuss in this article
Hidden bullish divergence pattern
Look at the picture which is an example of a hidden convergence condition, you can see when prices form a higher low
While the oscillator indicator shows a lower low, this is a signal of a possible trend continuation
And we can see that the trend finally continues, so as a forex trader.
Paying attention to patterns and understanding the pattern of divergence will help them in making trade decisions
Again, what needs to be remembered is that if there is a regular divergence condition, this will allow a reversal of the trend,
If before the bullish trend then there is a possibility that it will soon be bearish
And if the condition that occurs is a hidden divergence, then this is a signal of the continuation of the trend.
If before the trend is bullish then it will likely continue bullish higher
Hidden bearish divergence forex
If you see the picture above, it will get a similar pattern in different trend conditions, if previously the bullish hidden convergence condition shows prices at higher low and oscillator show a lower low.
While bearish hidden convergence is a condition where the price forms a lower high and the oscillator shows a higher high
In this condition, the possibility that will occur is a continuation of the bearish trend.
And from the example above, what happens is the continuation of the bearish trend.
Understanding the bearish hidden divergence pattern will give a trading signal for a possible continuation of the trend.
Hidden divergence indicator mt4
Some types of indicators default to mt4 are indicators with the type of oscillator that you can use to become hidden divergence indicators.
Such as RSI, stochastic oscillator, and MACD
Perhaps the best among these indicators are MACD, but of course to determine whether there is a hidden divergence you have to do a draw line manually
To make it easier for you to recognize hidden divergences there are custom indicators.
You can use this indicator to determine hidden divergence more quickly
Description of indicators
There are 4 main elements of DiverMACD, which are
- Indicator sub-window that displays the MACD area with standard periods 12, 26, 9.
- The red and green arrows in the sub-window that indicate the bearish or bullish potential of each signal divergence
- Divergence line on the chart to indicate a price pattern that ‘deviates’ from the MACD movement.
- Divergence line in the standard MACD sub-window
The first to a third component can be immediately obtained by simply installing DiverMACD.
Whereas to display the fourth element, you need to add the default MACD MT4. If you have your own MACD setup, the DiverMACD parameter will change according to the settings of the MACD standard.
Signal from DiverMACD
The DiverMACD indicator displays signals for 4 types of divergence, each of which is marked by a different line shape and color.
Here’s how to read the divergence signal on the DiverMACD indicator:
Regular Bearish Divergence
This condition signifies a potential bearish reversal. The DiverMACD indicator displays a regular bearish divergence signal with a straight red line.
In the example chart below, the indicator signal identifies the regular bearish divergence by displaying the price mark line which forms a higher high pattern on the chart, also indicating a lower low movement on the MACD.
Hidden Bearish Divergence
Hidden Bearish Divergence still signals falling price movements, but not as a reversal, but a continuation from the previous downtrend.
In accordance with the general theory of divergence, this condition is characterized by a lower high pattern at the price while a higher high is formed on the MACD.
The DiverMACD indicator clarifies the hidden bearish divergence indication with a broken red line, as illustrated in the following example:
Regular Bullish Divergence
Illustrate the signal by the DiverMACD indicator with a straight green line that usually appears at the bottom of the candle.
Symbolizing the potential for a bullish reversal, a regular bullish divergence occurs when prices form a lower low pattern, but MACD shows a higher low on the MACD. For more details, just look at the chart below:
Hidden Bullish Divergence
In contrast to the previous conditions, hidden bullish divergence tends to imply forward potential when the price trend is rising.
To identify signals is when prices on the chart form a higher low, but the MACD movement displays a lower low.
You can see this indication on the DiverMACD signal in the form of a broken green line like this:
Another additional signal that further simplifies the analysis is the arrow in the DiverMACD sub-window.
A red arrow facing down indicates a bearish potential, while a green arrow indicates a bullish opportunity.
You can use both signals to clarify divergence interpretations while showing potential points in placing buy or sell orders.
The DiverMACD signal provides technical analysis facilities that are not covered by the help of standard MT4 indicators
You can observe 4 divergence patterns; regular bearish, hidden bearish, regular bullish, and hidden bullish with more clear, following arrow signals that facilitate interpretation of each pattern.
However, it is important to note that DiverMACD signals are not always perfect.
There are situations where prices rise after a bearish divergence signal appears, and vice versa for a bullish divergence pattern.
This is apparently not influenced by differences in time frame or pair, because DiverMACD’s performance tends to be constant in every trading instrument and type of time frame.
Hidden divergence indicator mt4 free download
Using indicators is a very useful merchant tool, this will make it easier for you to determine hidden divergence and regular divergence
There are several types of indicators to look for divergence, besides divermacd there are still a number of third-party indicators that you can try to use.
Please you can choose one that suitable with your own preferable
How to install the indicator
1. Open your Metatrader Platform, Click File in the Top Left Corner, and Click on OPEN DATA FOLDER (See Figure below)
2. After Opened, Click / Open MQL4 Folder
3. Then Click / Open FOLDER Indicators
4. Copy your custom indicator file and Paste it in Folder Indicators as shown above. Indicator file characteristics are with extension: * .mq4, *. ex4
5. Finish, to appearance new indicator, a highlight in navigator window then right-click and choose refresh, your new indicator will appear in the custom indicator
Hidden divergence how to trade
How to trade using hidden divergence is actually quite easy, if you already understand the rules, then you need to make observations on the price and oscillator, or by using the indicators described above, this helps you find hidden divergence or regular divergence.
I will give an example of using a trading hidden divergence strategy in a chart on a USD / CHF Time Frame Daily
From the graph shown in the chart above shows the price in a downtrend and forms Lower High (LH) while Stochastic forms a Higher High (HH) at the end of the trip.
The question is whether the price continues its downtrend or vice versa.
Previously we had learned that the hidden divergence signals as a continuation of the trend
So we conclude that this signal is Bearish Hidden Divergence and shows us that the price will continue its downtrend. And this is the right time to open a SELL (SHORT) position.
If you really decide to open a SELL position (SHORT) when a bearish hidden divergence signal is formed in the price movements above, it is certain that you will get a huge profit because the price continues its downtrend.
Seems easy right? but however, you need to learn to determine hidden divergence as a valid signal, because sometimes price movement get impact from news
Forex trading can make someone rich, but on the contrary, can cause someone to go bankrupt, it all depends on each trader how they manage their capital
Using this hidden divergence strategy you should also learn and practice so that it will add to your experience
Hence you will know the advantage and disadvantage of this strategy
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