How Do I Trade Hidden Bullish and Hidden Bearish Divergence
Hidden divergence trading set-up is used as a possible sign for a price trend continuation after the price has finished retracing. It's a signal the original XAUUSD trend is resuming. This is the best divergence trading setup pattern to trade because its market signal is in the same direction as that of the continuing trend.
Hidden Bullish Divergence
This hidden bullish divergence setup happens when the price is making a higher low (HL), but the trading indicator is showing a lower low (LL). To remember easily think of them as W shapes on the price charts.
Hidden divergence signal occurs when there is a retracement in an upward gold price trend.
The exemplification laid-out below shows this setup - from the screen-shot the price made a higher low (HL) but the trading indicator made a lower low (LL), this shows that there was a hidden divergence trading signal between the Gold price & the indicator. This hidden divergence trade signal shows that soon the market upward trend is going to resume. In other words it shows this was just a retracement in an upward trend.
Hidden Bullish Divergence Signal - Gold Chart
This hidden bullish divergence trading signal confirms that the retracement move is complete & reflects the under-lying power of an upwards trend.
Hidden Bearish Divergence Trading Setup
Hidden bearish divergence trading pattern occurs when the price is making a lower high (LH), but the indicator is showing a higher high (HH). To remember easily think of and consider them as M shapes on price charts.
Hidden bearish divergence trading setup pattern occurs when there is a retracement in a downward trend.
The exemplification laid-out below shows the hidden divergence trading pattern - from this example the XAUUSD Gold price made a lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the Gold price & the indicator. This shows that soon the market downward trend is going to resume. In other words it shows this was just a retracement in a downwards trend.
Hidden Bearish Divergence Setup Signal - XAU/USD Chart
This hidden divergence trading setup pattern confirms that a retracement move is complete and reflects under-lying strength of a downwards trend.Other popular indicators used are Commodity Channel Index CCI trading indicator, Stochastic Oscillator Indicator, RSI & MACD. MACD and RSI are the best indicators.
NB: Hidden divergence trading pattern is the best type of divergence signal to trade because it generates a trade signal that is in the same direction with the current trend, thus it has got a high risk reward ratio - because it provides for the best possible entry for opening a trade.
However, a xauusd trader should combine this setup with another indicator like the stochastic oscillator or moving average crossover method & buy when the indicator is showing the XAUUSD Gold price is oversold & price has left this region, & sell when the trading indicator is showing Gold price is over-bought and the price has left this region.
Combining Hidden Divergence Setup with Moving Average(MA) Cross-over Method
A good indicator to combine these hidden divergence trading setups is the Moving Average MA indicator using the moving average cross over trading strategy method. This will create a good strategy for generating trading signals and confirming these signals before trading them.
Moving Average Cross-over Method - Gold Trading Strategies
In this trade strategy, once the divergence signal is given, a xauusd trader will then wait for the MA crossover strategy to give a buy or sell signal in the same direction:
- If there is a bullish divergence trading pattern between the price and indicator, wait for the moving average crossover method to give an upwards cross-over signal before opening a buy position.
- While for a bearish divergence trading setup pattern wait for the moving average crossover method to give a downwards bearish cross over signal before opening a sell trade.
By combining this hidden divergence trading set-up with other trading indicators this way, a trader will avoid fake outs when it comes to trading XAUUSD Gold metal using this divergence trading set-up.
Combining Together Hidden Divergence Signal with Fibonacci Retracement Levels
For this example we shall use an upwards market trend. We shall use the MACD.
Because the hidden divergence trading setup pattern show that the present price move is just a retracement in an upward trend we can combine this divergence trading signal with the most liked retracement tool indicator that's the Fib retracements.
The exemplification laid-out below shows that when this hidden divergence trading setup pattern appeared on the Gold price chart, the price had just hit the 38.2% Fib retracement. When price tested this Fibonacci retracement - this would have been a good level to open a buy order.
Combining Hidden Divergence Signal with Fibonacci Retracement Levels
Combining Together Hidden Divergence Setup Signal with Fibonacci Extension Levels
In the above example once the buy trade was opened, a gold trader would then need to calculate where to place their takeprofit for this trade. To do this a xauusd trader would need to use the Fibo Expansion Levels.
The Fib extension levels were drawn on the price chart like is shown below.
Combining Hidden Divergence Signal with Fibonacci Extension Levels
For this example there were 3 take profit order levels:
- Fibonacci Expansion Level 61.8 %
- Fibonacci Expansion Level 100.0 %
- Fibonacci Expansion Level 161.8 %
Using this hidden divergence strategy combined with Fib tools would have provided a good trade strategy with a good amount of profit set using these Fib extension levels take profit levels.
Study More Topics & Courses:
- What XAUUSD Patterns Should I Trade with in XAUUSD Day Trade?
- How to Draw XAUUSD Trend-line in XAUUSD Chart
- XAUUSD Price Action Patterns with MAs Gold Indicator
- Standard XAUUSD Account & Micro Gold Account
- How to Draw XAUUSD Trend-line in XAUUSD Chart
- How Do You Place More Trade Charts on MT4 Platform?
- Fibonacci Extension XAU USD Chart Levels Exercise vs Fibonacci Pullback XAU USD Chart Levels Exercises
- XAUUSD Software Platform MetaTrader 4 Data Window Guide Lesson
- MetaTrader 4 MetaEditor Guide for How to Add EA Expert Advisors
