XAUUSD Classic Divergence Explained PDF
gold classic divergence is used as a possible signal for a Gold trend reversal and is used by traders to analyze xauusd price movement and identify areas where the price could reverse and start going in the opposite direction. XAUUSD classic divergence setup is used as a low risk entry method when opening a gold trade or when exiting a xauusd trade transaction.
Classic divergence gold trading strategy is a low risk technique to sell near the xauusd market tops or buy near the xauusd market bottom, this makes the trading risk on your trades are to be small relative to potential reward. However, this classic divergence gold strategy is one technique with very many whipsaws & most traders do not recommend using it.
Divergence in Gold Trading is also used to predict the optimum point at which to exit an open gold trade. If you already have an open gold trade that is already profitable, a good method to identify a profit taking level would be to use the point where you spot this divergence gold trading setup.
There are two different types of classic divergence, based on the direction of the current Gold trend:
- Gold Trading Classic Bullish Divergence
- Gold Classic Bearish Divergence
Gold Divergence Scanner
Gold classic bullish divergence forms when price is forming lower lows (LL), but the indicator is making higher lows (HL). The divergence gold example illustrated and explained below shows classic divergence setup.
Gold Trading Classic Bullish Divergence - Gold Divergence Scanner
This xauusd divergence example uses MACD indicator as a xauusd trading divergence indicator.
From the above gold divergence scanner example the xauusd price made a lower low(LL) but the MACD indicator made a higher low(HL), this shows there is a divergence between the xauusd price & the MACD indicator. This divergence gold signal warns of a possible gold trend reversal.
Classic bullish divergence gold signal warns of a possible reversal in the gold trend from downward trend to upward trend - because even though the xauusd price went lower the volume of sellers that moved the xauusd price lower was less as shown by the MACD technical indicator. This divergence gold signal indicates underlying weakness of the downward xauusd trend.
XAUUSD Divergence Scanner
Gold classic bearish divergence forms when price is forming a higher high (HH), but the indicator is forming a lower high (LH). The gold divergence scanner example illustrated and explained below shows an example of the classic bearish xauusd trading divergence setup.
Gold Trading Classic Bearish Divergence - XAUUSD Divergence Scanner - XAUUSD Classic Divergence Scanner
This divergence scanner gold example also uses MACD technical indicator
From the above example the xauusd price made a higher high(HH) but the MACD indicator made a Lower High(LH), this shows there is divergence between the xauusd price & the MACD indicator. This divergence gold signal warns of a possible gold trend reversal.
Classic bearish divergence gold signal warns of a possible reversal in the gold trend from upward trend to downwards trend - this is because even though the xauusd price went higher the volume of buyers who pushed the xauusd price higher was less as shown by the MACD indicator. This signals underlying weakness of the upwards trend.
In the example above, if you had used divergence trading setup to trade you would have gotten good signals to enter or exit the trades at an optimal point. However, divergence gold trading signals just like other xauusd indicators, is also prone to whipsaws. That is why it's always good for gold traders using this xauusd trading setup to confirm the divergence gold trading signals with other indicators such as RSI, Stochastic Oscillator & Moving Averages.
An good gold indicator to combine divergence gold signal with is the moving average technical indicator, in this moving average trading indicator a trader should use the Moving Average Crossover System - Moving Average Crossover Gold System & Divergence Gold Trading
Example of Moving Average Crossover Strategy
Once the divergence gold signal is given, a trader will then wait for the Moving average crossover xauusd trading system to give a gold signal in the same direction of the gold divergence signal, if there is a classic bullish divergence signal, a trader will wait for the moving average crossover gold trading strategy to give an upward crossover gold signal, while for a bearish classic divergence gold signal the trader will wait for the Moving average crossover gold trading strategy to give a downward bearish crossover xauusd trading signal.
By combining the gold classic divergence trading signals with other technical gold indicators this way, a trader will be able to avoid gold whipsaws when it comes to trading the classic divergence gold signals, because the trader will wait until the gold trend has actually reversed & is already moving toward the direction of the divergence trade setup, hence the trader will not fall into the trap of picking market tops & market bottoms.
