Divergence Commodity Trading Setups

Divergence Commodity Trading Definition - Divergence commodity is one of the commodity setups used by Commodities traders. Divergence commodity involves looking at a commodity chart & one more commodity indicator. For our divergence examples we shall use the MACD commodities technical indicator.

To spot this commodity divergence setup find two chart points at which commodities price makes a new swing high or a new swing low but the MACD indicator does not, indicating a commodity divergence between commodities price & momentum.

To look for divergence commodity signal we look for 2 chart points, two highs which form an M shape on the commodities trading chart or two lows that form a W Shape on commodities trading chart. Then look for the same M shape or WShape on the Commodities indicator that you use to trade - for examples RSI indicator, MACD indicator or Stochastic Oscillator technical indicator.

Example of a Commodities Trading Divergence Trade Setup:

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

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

We then draw one line on the commodities trading chart & another line on the MACD technical indicator.

Drawing Divergence Commodity Trading Lines - Commodity Trading Divergence Commodity Strategy - Commodity Trading Divergence Commodities Entry & Exit

The commodity chart above shows an example of one of the 4 types of commodity divergence setup, the one above is known as hidden bearish commodity trading divergence. Types of commodity divergence setups are covered in the next learn commodity lesson.

How to spot divergence commodity setup

In order to spot Commodity Trading divergence trading signal 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 commodity terms:

M shapes on Commodity charts dealing with Commodities price Highs

W Shapes on Commodity charts dealing with Commodities price lows

Example of M Shapes on Commodity Trading Charts

Examples of W Shapes on Commodities Charts

Now that you have learned the divergence commodity terms that are used to explain divergence trading setup. Let us look at the two types of commodity divergences and how to trade these commodities trading divergence chart setups.

The two commodities trading divergence types which are:

1. Classic Commodity Trading Divergence
2. Hidden Commodity Trading Divergence

These two commodity divergence setups - classic commodities divergence trading and hidden commodities divergence trading are explained on the following learn commodity guides in the commodity trading lessons tutorials on this website located at the navigation menu under the topics learn commodity lessons.