How to Read Gold Classic Bullish Divergence & Bearish Divergence
Classic divergence is used as a signal for a possible gold trend reversal and classic divergence is used by traders when they are looking for an area where xauusd price could reverse and start moving in the opposite direction. For this reason gold traders Read this classic divergence signal as a low risk gold entry method and as an accurate way of exiting out of a xauusd trade.
This classic divergence strategy is a low risk method to sell near the xauusd market top or buy near the xauusd market bottoms, this makes the risk on your xauusd trades small relative to the potential reward. However, this is classic divergence strategy is one method with very many gold whipsaws and most traders do not recommend using this strategy.
Classic Divergence in Gold Trading is also used to predict the optimum level at which to exit a gold trade. If you already have an open gold trade that's already profitable, a good way to identify a profit taking level would be the area where you spot this classic trading divergence setup.
There are two different types of classic divergence setup - based on the direction of the market trend:
- Classic Bullish Gold Divergence
- Classic Bearish Gold Divergence
Classic Gold Bullish Divergence
Gold classic bullish divergence set-up forms when price is making lower lows - LL, but the indicator is making higher lows - HL. The classic trading divergence examples illustrated & explained below explains this gold trading setup.
Classic Bullish Gold Divergence
This classic trading divergence example uses MACD technical indicator as a xauusd divergence technical indicator.
From the above classic trading divergence example - the xauusd price made a lower low - LL but the technical indicator made a higher low - HL, this shows there is a divergence trading signal between the xauusd price and the gold indicator. This classic divergence signal warns of a possible gold trend reversal.
Classic bullish divergence signal warns of a possible reversal in the gold trend from downward trend to upward trend. This is because even though the xauusd price went lower the volume of sellers that moved the xauusd price lower was less as is shown by the MACD indicator. This signals the underlying weakness of the downward xauusd trend.
Gold Trading Classic Bearish Divergence
Classic bearish divergence xauusd trading set up occurs when price is making a higher high - HH, but trading indicator is making a lower high - LH. The classic bearish divergence xauusd trading example illustrated and explained below explains this gold trading setup.
How Do I Read Gold Trading Classic Bullish Divergence Trading Signal & Gold Trading Classic Bearish Divergence Signal?
This classic bearish gold divergence trading example also uses MACD xauusd trading technical indicator
From the above example the xauusd price made a higher high - HH but the technical indicator made a Lower High - LH, this shows there is a divergence signal between the xauusd price and the gold indicator. This classic gold bearish divergence signal warns of a possible gold trend reversal.
Classic bearish divergence signal warns of a possible change in gold trend from upwards trend to downwards trend. This is because even though the xauusd price went higher the volume of buyers that moved the xauusd price higher was less as illustrated by the MACD indicator. This classic bearish divergence signal shows underlying weakness of the upward trend.
In the examples above, if you had used divergence gold trading strategy to trade you would have generated good gold trading signals to enter or exit the xauusd trades at optimal points. However, gold divergence signals just like other xauusd indicators, is also prone to gold whipsaws - that's why it is always good to confirm the divergence gold trading signals with other technical gold indicators such as a Moving Averages & RSI technical indicators.
How Do I Read Gold Trading Classic Bullish Divergence vs Gold Trading Classic Bearish Divergence?
