We are always talking about trading as an extremely risky with guarantee for success endeavor. But in reality there are ways to almost fir sure know and understand what you are up against and what time it is better for you to get in and out. This way is called trading divergences.
And while it may sound difficult the concept of it is not nearly as horrifying as you might initially think.
Divergence trading is a pretty cool tool that is going to help us getting into trades at the lowest point and getting out near the highest one. That make every trade, where you used this oscillator pretty low in risk assessment.
In short, trading divergences is comparing the movement of the price to the movement of the indicators. And here it doesn’t matter which indicator you use – the point is to spot the difference between the movement of the price and the oscillator.
And as I said you can use any indicator – SAR, MACD or the stochastic, it doesn’t really matter. All you need is to spot the difference between them and a price – you need to see where they are diverging from each other. That is where the name comes from.
The piece is reaching lower lows? Higher highs? Is the picture on the graph and in the indicator different? That is the job for this nifty little tool.
There are 2 types of divergence: regular and hidden. And we are going to look through both of them so that you can know and understand your trading timing better than ever.