Hidden Bullish & Trade Hidden Bearish Divergence Trade

Hidden divergence setup is used by Gold traders as a possible signal for a market trend continuation after the price has retraced. It's a signal the initial trend is resuming. This is best set-up to trade because it's in same direction as that of the continuing market trend.

Gold Hidden Bullish Divergence Setup

This setup occurs when trading price is forming a higher low (HL), but the oscillator (indicator) is displaying a lower low (LL). To remember them easily think of them as W shapes on Charts. It forms when there's a retracement in an upwards trend.

The illustrations illustrated and explained below portrays an screen shot of this trading formation, from the screen shot the price made higher low (HL) but the technical indicator made a lower low (LL), this portrays that there was a diverging trade signal between the price & indicator. This signal illustrates that soon the market up trend is going to resume. In other words it portrays this was just a retracement in an upwards trend.

Examples of Trade Divergence Setups in Charts

This confirms that a price retracement move is complete & illustrates underlying momentum of an upward trend.

XAU/USD Hidden Bearish Divergence Trade Setup

This setup occurs when trading price is making/forming a lower high ( LH ), but the oscillator trading is displaying a higher high ( HH ). To remember them easily think of them as M-shapes on Charts. It forms when there's a retracement in a downwards trend.

The illustrations illustrated and explained below portrays an screen shot of this formation, from the screen shot the price made a lower high ( LH ) but the indicator formed a higher high ( HH ), this illustrates that there was a divergence setup between the price and the indicator. This illustrates that soon the market downtrend is going to resume. In other words it portrays this was just a retracement in a downwards trend.

How Do I Identify Trading Bullish Hidden Divergence and Trading Bearish Hidden Divergence?

This confirms that a price retracement move is complete and indicates the under-lying momentum of a downwards trend.

Other popular indicators used are CCI trading indicator (Commodity Channel Index (CCI) Trading Indicator), Stochastic Indicator, RSI and MACD. MACD & RSI Indicator are the best indicators.

NB: Hidden divergence pattern is the best type divergence pattern to trade because it gives a signal that's in the same direction with the current market price trend, thus the setup has got a high risk to reward ratio. This setup provides for the best possible entry.

However, a xauusd trader should combine this trading setup with another indicator like the stochastic oscillator or moving average & buy when gold is oversold, and sell when gold is overbought.

Combining Together Hidden Divergence Pattern with Moving Average MA Cross over Method

A good technical indicator to combine these trading setups is moving average indicator using the moving average cross over method. This will create a good strategy.

Divergence Strategies PDF Tutorial

Moving Average Cross over Technique

In this technique, once the trading signal is given, a trader then will wait out for the moving average cross over technique to give a buy/sell signal in same direction, if there's a bullish divergence set up between the price and indicator, wait for the moving average cross over method to give an upward cross-over signal, while for a bearish diverging setup wait for the moving average cross over trading strategy method to give a downwards bearish cross-over signal.

By combining this signal with other indicators this way one will avoid fake outs in trading this signal.

Combining Together with Fibonacci Retracement Levels

For this exemplification we shall use an upward trend. We shall use MACD indicator.

Because the hidden divergence setup is just a price retracement in an upwards trend we can combine this signal with most popular retracement tool that is the Fibonacci retracement levels. The example shown & explained below portrays that when this trading setup formed on the trading chart, price had just hit 38.20% level. When price tested this level, this would have been a good level to open a buy trade order.

What is the Meaning of Fibonacci Retracement Indicator?

Combining with Fibonacci Extension Levels

In the trading above example once the buy trade was placed, a trader would then need to calculate where to put take profit for this trade. To do this a gold trader would need to use the Gold Fibonacci Expansion Levels.

The Fib extension was drawn such as shown & shown on the trading chart as cited below.

How to Identify Trading Bullish Hidden Divergence and Trading Bearish Hidden Divergence

For this exemplification there were three take-profit levels:

Expansion Level 61.80% - 131 pips profit

Extension Level 100.00% - 212 pips profit

Expansion Level 161.80% - 337 pips profit

From this strategy combined with Fibo indicator would have provided a good strategy with a good amount of trading profit set using these take profit order levels.

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