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