Hidden Bullish & Gold Trading Hidden Bearish Divergence Gold Trading
Hidden divergence is used as a possible sign for a gold trend continuation after the price has retraced. It is a signal that the original gold trend is resuming. This is best setup to trade because it's in same direction as that of the continuing market trend.
Gold Trading Hidden Bullish Divergence
This setup happens when price is forming a higher low (HL), but the oscillator (indicator) is showing a lower low (LL). To remember them easily think of them as W-shapes on Chart patterns. It occurs when there is a retracement in an upward Gold trend.
The examples illustrated & explained below shows an image of this gold trading setup, from the screenshot the xauusd price made higher low (HL) but the indicator made a lower low (LL), this shows that there was a diverging signal between the xauusd price and indicator. This signal shows that soon the xauusd market up gold trend is going to resume. In other words it shows this was just a retracement in an upwards gold trend.
This confirms that a retracement move is complete and indicates underlying strength of an upwards xauusd trend.
XAUUSD Trading Hidden Bearish Divergence
This setup happens when price is forming a lower high (LH), but the oscillator is showing a higher high (HH). To remember them easily think of them as M-shapes on Chart patterns. It occurs when there is a retracement in a downward Gold trend.
The examples illustrated & explained below shows an image of this gold trading setup, from the screenshot the xauusd price made a lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the xauusd price and indicator. This shows that soon the xauusd market down gold trend is going to resume. In other words it shows this was just a retracement in a downward trend.
This confirms that a retracement move is complete & indicates underlying strength of a downward xauusd trend.
Other popular indicators used are CCI indicator (Commodity Channel Index), Stochastic Oscillator, RSI and MACD. MACD and RSI are the best technical indicators.
NB: Hidden divergence is the best type to trade because it gives a signal that's in the same direction with the current market trend, thus it has a high reward to risk ratio. It provides for the best possible entry.
However, a trader should combine this xauusd trading setup with another indicator like the stochastic oscillator or moving average and buy when gold is oversold, and sell when gold is overbought.
Combining Hidden Divergence with Moving Average Crossover Method
A good indicator to combine these gold trading setups is moving average indicator using the moving average cross-over method. This will create a good trading strategy.
Moving Average Crossover Technique
In this strategy, once the signal is given, a trader will then wait for the moving average cross over technique to give a buy/sell signal in same direction, if there is a bullish divergence set up between the xauusd price and indicator, wait for the moving average crossover system to give an upwards cross over signal, while for a bearish diverging setup wait for the moving average crossover system to give a downward bearish crossover signal.
By combining this gold signal with other technical indicators this way one will avoid whip-saws when it comes to trading this xauusd trading signal.
Combining with Gold Trading Fibo Retracement Levels
For this example we shall use an upwards market trend. We shall use MACD indicator.
Because the hidden divergence is just a retracement in an upwards gold trend we can combine this gold trading signal with most popular retracement tool that's the Fibonacci retracement levels. The example illustrated and explained below shows that when this xauusd trading setup appeared on the trading chart, xauusd price had just hit the 38.20% level. When xauusd price tested this level, this would have been a good level to place a buy order.
Combining with Gold Trading Fibo Expansion Levels
In the xauusd trading example above once the buy gold trade was placed, a trader would then need to calculate where to place take profit for this trade. To do this one would need to use the Gold Trading Fib Expansion Levels.
The Fib expansion was drawn as shown and illustrated on the trading chart as shown below.
For this example there were 3 take profit levels:
Expansion Level 61.8% - 131 pips profit
Expansion Level 100.0% - 212 pips profit
Expansion Level 161.8% - 337 pips profit
From this strategy combined with Fibonacci would have provided a good strategy with a good amount of profit set using these take profit levels.
