Hidden Bullish & CFDs Hidden Bearish Divergence CFDs

Hidden divergence is used as a possible sign for a cfd trend continuation after the cfds price has retraced. It is a signal that the original cfd trend is resuming. This is the best setup to trade because it is in same direction as that of the continuing market trend.

CFDs Hidden Bullish Divergence

This setup happens when cfds price is making 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 cfds trend.

The example illustrated and shown below shows an image of this cfd setup, from the screenshot the cfds price made higher low (HL) but the indicator made a lower low (LL), this shows that there was a diverging signal between the cfds price and indicator. This signal shows that soon the cfd market up cfd trend is going to resume. In other words it shows this was just a retracement in an upward cfd trend.

This confirms that a retracement move is complete and indicates underlying strength of an upward cfds trend.

CFDs Hidden Bearish Divergence

This setup happens when cfds price is making 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 cfds trend.

The example illustrated and shown below shows an image of this cfd setup, from the screenshot the cfds price made lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the cfds price & indicator. This shows that soon the cfd market down cfd 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 and indicates underlying strength of a downward cfds trend.

Other popular technical indicators used are CCI indicator (CCI), Stochastic Oscillator, RSI and MACD. MACD & RSI are the best 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 best possible entry.

However, a trader should combine this cfd setup with another indicator like the stochastic oscillator or moving average and buy when the cfd is oversold, and sell when the cfd is overbought.

Combining Hidden Divergence with Moving Average Crossover Method

A good indicator to combine these cfd setups is the moving average indicator using the moving average cross-over method. This will create a good trading strategy.

Moving Average Crossover Method

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 cfd signal in same direction, if there is a bullish divergence set up between the cfds price and indicator, wait for the moving average crossover system to give an upward 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 cfd trading signal with other technical indicators this way one will avoid whipsaws when it comes to trading this cfds trade signal.

Combining with CFDs Fib Retracement Levels

For this example we shall use an upwards market trend. We shall use the MACD indicator.

Because the hidden divergence is just a retracement in an upwards cfd trend we can combine this cfd trading signal with most popular retracement tool that is the Fibonacci retracement levels. The example illustrated and shown below shows that when this cfd set-up appeared on the chart, the cfds price had just hit the 38.20% level. When cfds price tested this level, this would have been a good level to place a buy order.

Combining with CFDs Fibonacci Expansion Levels

In the cfd example above once the buy cfd 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 CFDs Fibonacci Expansion Levels.

The Fib expansion was drawn as illustrated & shown on the chart as illustrated & shown below.

For this example there were three take profit areas:

Expansion Level 61.80% - 131 pips profit

Expansion Level 100.00% - 212 pips profit

Expansion Level 161.80% - 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.