FOREX THEORY
Divergence Trading
Higher Highs and Lower Lows
Just think “higher highs” and “lower lows”
Price and momentum normally move hand in hand like Hansel
and Gretel, Batman and Robin, Serena and Venus Williams, salt and pepper…You
get the point.
If price is making higher highs, the oscillator should also
be making higher highs. If price is making lower lows, the oscillator should
also be making lower lows.
If they are NOT, that means price and the oscillator are
diverging from each other. And that’s why it’s called “divergence.”
Divergence trading is an awesome tool to have in your
toolbox because divergences signal to you that something fishy is going on and
that you should pay closer attention.
Using divergence trading can be useful in spotting a
weakening trend or reversal in momentum. Sometimes you can even use it as a
signal for a trend to continue!
There are TWO types of divergence:
-Regular
-Hidden
In this grade, we will teach you how to spot these
divergences and how to trade them. We’ll even have a sweet surprise for you at
the end.
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