Spotting Divergence Trader Strategies

Divergence Trader Strategies is one of the trade set-ups used by CFD traders. It involves looking at a cfd chart and one more cfd indicator. For our example we shall use the MACD technical indicator.

To spot this divergence trader strategies find two chart points at which cfds price makes a new swing high or a new swing low but the MACD indicator doesn't, indicating a divergence between cfds price & momentum.

To look for Divergence trader strategies we look for two chart points, two highs that form an M-shape on the CFD Trading chart or two lows that form a W-Shape on the CFD Trading chart. Then look for same M-shape or W-Shape on CFD indicator you use to trade.

Example of a CFD Divergence Trade Strategies:

In the CFD Trading chart below we spot 2 chart points, point A & point B (swing highs). These two points form an M-shape on the cfds price chart.

Then using MACD technical indicator we check the highs made by the MACD, these are the highs which are directly below Chart points A & B.

We then draw one line on the CFD chart and another line on the MACD technical indicator.

Drawing Divergence CFD Lines - Divergence trader strategies

The CFD chart above shows an example of one of the 4 types of divergence trader strategies, the one above is known as hidden bearish divergence strategy, one of the best type to trade.

How to spot divergence trader strategies

In order to spot CFD Divergence trader strategies we look for the following:

• HH=Higher High- 2 highs but the last one is higher
• LH= Lower High- 2 highs but the last one is lower
• HL=Higher Low- 2 lows but the last one is higher
• LL= Lower Low- 2 lows but the last one is lower

First let us look at the illustrations of these divergence setup trading terms:

M-shapes dealing with CFDs price Highs

Divergence trader strategies

W-Shapes dealing with CFDs price lows

Divergence trader strategies

Example of M Shapes

Divergence trader strategies

Examples of W Shapes

Divergence trader strategies

Now that you've learned the Divergence trader strategies terms which are used to explain setup. Let us look at the 2 types of CFD Trading divergences and how to trade these divergence trader strategies setups.

There two types are:

1. Classic divergence trader strategies

2. Hidden divergence trader strategies

These two setups are the most oftenly used divergence trader strategies and these are described on the cfd strategies section of this website.