Trading Cuentas

Divergence can be identified from the oscillating signals, the most popular of which are the MACD, Stochastic and RSI. Any of these running on your day trading chart with costs in either candlesticks or bar chart form can be employed.

Bearish Divergence

Bearish divergence exists when the price chart is apparently bullish but the oscillator is showing a bearish trend. In that particular situation a line across the highest highs of the price chart will be showing a upward trend. But a line drawn across the highest highs of the oscillating indicator will show a falling trend. If you are in this market going long, it is maybe time to get out. If you have a signal to open a trade to go long, the deviation is signalling you not to do it. Bullish Divergence

Bullish deviation is the other way round. It exists when the price movement on the day trading chart is reputedly downward, but the oscillator is showing a upward trend. Here a line across the lowest lows of the price chart will show bearish (downward) movement, while a line across lowest lows of the oscillator will be moving upward. The deflection is signalling the bearish trend is coming to a close so you can close short trades and open long trades if that fits with the other signals of your system.

Naturally no system is 100 pc accurate and that applies to using deviation in trading just the same as anything more. Financial trading is risky and you can lose.

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