FOREX THEORY
How To Trade Divergences
Now it’s time to put those Jedi-divergence mind tricks to
work and force the markets to give you some pips!
Here we’ll show you some examples of when there was
divergence between price and oscillator movements.
First up, let’s take a look at regular divergence. Below is
a daily chart of USD/CHF.
We can see from the falling trend line that USD/CHF has been
in a downtrend. However, there are signs that the downtrend will be coming to
an end.
While price has registered lower lows, the stochastic (our
indicator of choice) is showing a higher low.
Something smells fishy here. Is the reversal coming to an
end? Is it time to buy this sucker?
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