Trading CFD With Divergence in MetaTrader 4 MT5 PDF Free Download
Divergence CFD Setup is one of the trade setups used by CFD traders. It involves looking at a cfd chart & one more cfd indicator. For our example we shall use the MACDcfds technical indicator.
To spot this cfd divergence trading setup find 2 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 and momentum.
To look for divergence cfd setup we look for two chart points, two highs that form an M-shape on the cfd chart or two lows that form a W-Shape on the cfds trading chart. Then look for same M-shape or W-Shape on cfd indicator you use to trade.
Example of a CFDs Divergence Trade Setup:
In the cfds chart below we spot 2 chart points, point A and point B (swing highs). These 2 chart points form an M-shape on the cfds price chart.
Then using MACD technical indicator we check the highs made by the MACD technical indicator, these are highs that are directly below Chart points A and B.
We then draw one line on the cfd chart & another line on the MACD cfds technical technical indicator.
Drawing CFD Divergence CFD Lines
The cfd chart above shows example of one of the four types of cfd divergence setups, the one cfd divergence trading set up above is known as hidden bearish cfd divergence trading setup, one of the best type to trade. Types of cfd divergences are covered in the next learn cfd tutorial lesson.
How to spot cfd divergence setups
In order to spot CFDs divergence signal we look for following:
- HH=Higher High- two 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 cfds divergence terms:
M-shapes dealing with CFDs price Highs
W-Shapes dealing with CFDs price lows
Example of M Shapes on CFDs Charts
Examples of W Shapes on CFDs Charts
Now that you have learned the cfd divergence trading terms that are used to explain divergence cfd set-up. Let us look at the two types of divergences and how to trade these cfd chart setups.
There two types are:
- Classic Divergence CFD Setups
- Hidden Divergence CFD Setups
These two setups are described on the following guides below
Trading CFD With Divergence in MetaTrader 4 MT5 PDF Download - Trading CFD With Divergence on MT4 MT5 PDF Free Download - MT4 MT5 Divergence CFD Tutorial.
