Trading Forex With Divergence in MetaTrader 4 MT5 Platform - Trading Divergence in MetaTrader 4 MT5 Setups
Divergence Trading Setup is one of the trade setups used by Forex traders. It involves looking at a forex chart & one more trading indicator. For our example we shall use the MACD indicator.
To spot this forex divergence trading setup find two chart points at which price makes a new swing high or a new swing low but the MACD indicator does not, indicating a divergence between forex price and momentum.
To look for divergence trading setup we look for 2 chart points, two highs that form an M-shape on the Forex trading chart or 2 lows that form a W-Shape on the Forex trading chart. Then look for the same M-shape or WShape on the indicator you use to trade.
Example of a Forex Trading Divergence Trade Setup:
In the EUR USD forex chart below we identify two chart points, point A and point B (swing highs). These 2 chart points form an M-shape on the forex trading price chart.
Then using MACD trading technical indicator we check the highs made by the MACD technical indicator, these are the highs that are directly below Chart points A and B.
We then draw one line on the Forex trading chart & another line on the MACD technical indicator.
Drawing Forex Divergence Trading Lines
The forex chart above shows an example of one of the 4 types of forex divergence trading setups, the one forex divergence setup above is known as hidden bearish forex divergence trading setup, one of the best type to trade. Types of forex divergences are covered in the next learn forex guide lesson.
How to spot forex divergence setups
In order to spot Forex divergence trading signal we look for the 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 forex divergence trading terms:
M-shapes dealing with FX Trading price Highs
W Shapes dealing with price lows
Example of M Shapes on Forex Trading Charts
Examples of W Shapes on Forex Charts
Now that you have learned the forex divergence trading terms that are used to explain divergence trading setup. Let us look at the 2 types of divergences and how to trade these forex chart setups.
There two types are:
- Classic Divergence Trading Setups
- Hidden Divergence Trading Setups
These two setups are explained on the following guides below
Classic Divergence Trading Setup
Hidden Divergence Trading Setup
Trading Forex With Divergence in MetaTrader 4 MT5 PDF Download - Trading Forex With Divergence in MT4 MT5 Guide - MT4 MT5 Divergence Guide.
