Divergence Trader Strategies
Divergence Trader Strategies is one of the trade set-ups used by Commodities traders. It involves looking at a commodity chart & one more commodity indicator. For our examples we shall use the MACD technical indicator.
To spot this divergence trader strategies find two chart points at which commodities trading price makes a new swing high or a new swing low but the MACD indicator does not, indicating a divergence between commodities price & momentum.
To look for Divergence trader strategies we look for two chart points, two highs that form an M-shape on the Commodity Trading chart or two lows that form a W Shape on Commodity Trading chart. Then look for the same M-shape or WShape on the Commodities indicator you use to trade.
Example of a Commodity Trading Divergence Trade Strategies:
In the Commodity Trading chart below we spot two chart points, point A & point B (swing highs). These 2 points form an M-shape on the commodities trading 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 Commodity Trading chart and another line on MACD indicator.
Drawing Divergence Commodity Trading Lines - Divergence trader strategies
The Commodity Trading 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 Commodity Divergence trader strategies we look for the following:
- HH=Higher High- two highs but the last one is higher
- LH= Lower High- two highs but the last one is lower
- HL=Higher Low- two lows but the last one is higher
- LL= Lower Low- two lows but the last one is lower
First let us look at the illustrations of these divergence setup trading terms:
M-shapes dealing with Commodity price Highs
Divergence trader strategies
W Shapes dealing with Commodities price lows
Divergence trader strategies
Example of M Shapes
Divergence trader strategies
Examples of W Shapes
Divergence trader strategies
Now that you have learned the Divergence trader strategies terms that are used to explain trading setup. Let us look at the two types of Commodity Trading divergences & how to trade these divergence trader strategies setups.
There two types are:
- Classic divergence trader strategies
- Hidden divergence trader strategies
These 2 setups are the most commonly used divergence trader strategies & these are explained on the commodity strategies section of this website.
