Divergence Trading Setups Summary - Gold TRADING

Classic Bearish Divergence Setup - HH price, LH indicator - Indicates under-lying weakness of a price trend - Warning of a possible reversal in the market trend from upward to downward.

Classic Bullish Divergence Trading Setup - LL price, HL indicator - Indicates under-lying weakness of a trend - Warning of a possible reversal in the market trend from downward to upward.

Hidden Bearish Divergence Setup - LH price, HH indicator - Indicates under-lying momentum of a trend - Mainly found during the corrective rallies in a downwards trend.

Hidden Bullish Divergence - HL price, LL indicator - Indicates the underlying momentum of a trend - Occurs mainly during the corrective declines in an upward trend.

Example Illustrations of Divergence Trading Setup Terms:

M-shapes dealing with price highs

Divergence Gold Trading Setups Explained - XAUUSD Divergence Trade Setups Tutorial

M shapes: Divergence Trading Terms

W-shapes dealing with price lows

Divergence Gold Trading Setups Summary - XAUUSD GOLD TRADING DIVERGENCE SETUPS

W shapes: Divergence Trading Terms

These are the shapes to look for when using the divergence trading setups.

One of the best indicators for using with this divergence trading setup is the MACD Indicator - as a divergence trading signal, MACD divergence setup is a high probability set-up to enter a trade. But as with any trading signal there are certain parameters which have to be looked at to make this trading signal a high probability setup.

Getting straight into a position as soon as you as a trader see this setup is not the best strategy to use. This divergence trading setup should be used in combination with another indicator to confirm the market direction of the XAUUSD price trend. A good trade system to combine this setup with is the MA crossover strategy.

Be aware this setup on a smaller timeframe isn't so significant. When divergence is seen on a 15 minute price chart it might or may not be very important as compared and analyzed to the 4 H time-frame or the 1 day timeframe.

If seen on a 60 minute trading chart, 4 H chart, or daily chart timeframe, then begin looking and searching for other factors to reflect when price might react to the divergence.

This brings us to a key point when using this trading signal to enter a trade: on a higher timeframe MACD divergence setup signal can be a fairly reliable indicator of a reversal in price direction. However, the large question is: WHEN? That is why getting straight in to a trade as soon as you see this divergence setup isn't always the best strategy.

Many traders get caught out by entering the market too soon when they see MACD divergence setup. In many cases, price has still got some momentum to continue in the prevailing market direction. The trader who has jumped in too soon only can stare at and watch the computer screen dismayed as the market price moves through his stoploss order taking him out.

If you simply look for this divergence trading setup without any other considerations you'll not be aligning yourself with the best chance, so to increase the chance of making a winning trade you should also look at other factors, specifically other indicators.

What other factors should you consider when using this divergence trading setup?

1. Support, Resistance and Fibonacci levels on higher timeframesAnother way to greatly increase the chances of a winning trade is to look at the higher chart timeframes before opening an order based on the lower time frame.

If you look at and observe the hourly, 4 H or daily price chart has reached a major resistance level, support or Fib level then the probability of a successful trade position based on divergence setup on a lower timeframe at this point increases.

2. Reward to risk ratioAnd finally, when searching for divergence trading set-ups, it is very crucial that you enter the trade correctly, so that as you have a good risk: reward ratio & only open trades which have got more profit potential than what you are risking. If you understand how to open a trade transaction properly, you can measure your risk : reward ratio before you open a trade position. That way, you can only choose to open trading orders which offer a favorable risk:reward ratio.

Finally, when used correctly and combined with other indicators to confirm this divergence trading signal, divergence trading set-up can offer a good trading method for trading XAUUSD metal.

Study More Lessons and Courses:

Trade Gold Trading

Divergence Trading Setups Summary - Gold TRADING

Example Illustrations of Divergence Trading Setup Terms:

M-shapes dealing with price highs

W-shapes dealing with price lows