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Divergence Analysis in Gold Trading

Divergence analysis setup is one of the trading signals which can be generated when using the divergence trading analysis stochastic oscillator indicator.

Divergence on stochastic indicator is a signal that a rally or retracement is losing steam & is likely to reverse. It means that the last buyers or the last sellers are pushing the price in one way while majority of the other traders have stopped trading in that way and are cautious of a price correction or pull back.

There are 4 types of divergence setups that can be traded using this divergence technical analysis.

Example 1: XAUUSD Classic Bullish Divergence

A Bullish Divergence in the stochastic indicator & the price is followed by a rise in price.

Divergence Trading Analysis in XAUUSD Trading - Divergence Trading Strategy PDF Tutorial

stochastic divergence trading analysis

When the price is making new lows the stochastic divergence analysis is not moving past its previous lows it is an indication that the down-trend is about to turn & reverse & a bullish rally is likely to occur.

In the example displayed above stochastic divergence trading analysis set-up the price set a new low but it wasn't coupled with a new low in the measure of the Stochastic oscillator indicator, when the price formed a new low then the technical indicator should have followed suit, but the stochastic technical indicator did not therefore the stochastic divergence trading analysis set-up.

This stochastic divergence trading analysis setup is even stronger because there is combination of a divergence & then followed by a rise above the 20% level. This combines the Overbought and Oversold levels.

Example 2: Gold Classic Bearish Divergence

A Bearish Divergence in the stochastic indicator & the price is followed by a drop in price.

Divergence Analysis in XAU USD Trading

stochastic divergence analysis

When price is making new highs but the stochastic divergence trading analysis is not moving beyond its previous high it's an indication the up-trend will reverse and that a bearish divergence will follow.

This stochastic divergence analysis set-up is even stronger because there is combination of divergence setup with a dip below the overbought 80 level.

Example 3: Gold Hidden Bullish Divergence Trade Setup

This stochastic divergence trading analysis setup signifies a retracement in an upwards trend. This is the best type of divergence setup to trade, because you are not trading a trend reversal, but you're trading within the direction of the price trend.

Trade Divergence Analysis Setups - How Do I Read Divergence Trading Setup?

stochastic technical indicator divergence analysis

Even though, the stochastic oscillator trading in this stochastic divergence trading analysis set-up made a lower low the price low was higher than the previous low (higher low: HL). This means though bears made a good attempt to push price down as indicated by the stochastic divergence trading analysis, this was not reflected on the price, and the price did not make a new low. This is the best place to buy gold, since it is even in an upward gold trend there is no need for you to wait for a confirmation trading signal, because you are buying in an upwards Gold trend.

Example 4: Gold Hidden Bearish Divergence

This set up signifies a retracement in a downward trend.

Divergence Analysis in XAUUSD Trading - How Do You Read Divergence Trade Setup?

stochastic technical indicator divergence analysis

This is the best type of divergence setup to trade with this stochastic oscillator divergence trading analysis set-up, because you are not trading a price trend reversal, but you are trading within the direction of the price trend. This is best place to sell gold, since it's even in a down-trend there is no need to wait and chill for a confirmation trading signal, because you're selling in a downward trend.

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