Stochastic Oscillator Bullish Divergence & Bearish Divergence Gold Trading

Divergence gold trading is one of the trading signals that can be generated when using the stochastic oscillator indicator.

Divergence gold trading is a signal that a rally or retracement is losing steam and is likely to reverse. It means that last buyers or last sellers are pushing price in one way while majority of other traders have stopped trading in that direction and are cautious of a price correction or pullback.

There are four types of divergence trading setups

Example 1: Classic Bullish Divergence Setup

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

Stochastic Oscillator Indicator Classic Gold Bullish Divergence

When the price is making new lows the Stochastic indicator is not moving past its previous lows it is an indication that the downward trend is about to reverse and a bullish trading rally is likely to occur.

In the trading example above the price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator indicator, when price formed a new low then the stochastic gold indicator should have followed suit, but the stochastic indicator did not therefore the trading classic divergence trade setup.

Gold classic divergence trading setup is even stronger because there is combination of a divergence trade setup and then followed by a rise above the 20% indicator level. This combines the Overbought and Oversold levels with this divergence trade setup.

Example 2: Classic Bearish Divergence

A Classic Gold Bearish Divergence trading setup in the stochastic oscillator technical indicator and the price is followed by a drop in price.

Stochastic Indicator Classic Gold Bearish Divergence

When price is making new highs but the Stochastic oscillator indicator is not moving beyond its previous high it is an indication the upward trend will reverse and that a gold trading bearish divergence trade set-up will follow.

This classic gold trading bearish divergence trade setup is even stronger because there is a combination of a divergence with a dip below the overbought 80 level.

Example 3: Hidden Bullish Divergence Setup

Hidden Gold Bullish Divergence trade setup signifies a retracement in an up-ward trend. This trade hidden divergence trading setup is the best type of trade divergence setup to trade, because you aren't trading a price reversal, but you are trading within the direction of the trend.

Stochastic Indicator Hidden Gold Bullish Divergence

Even though, the stochastic oscillator indicator made a lower low the price low was higher than the previous low (higher low: HL). This means even though bears made a reasonable attempt to push xauusd price down as indicated by the stochastic indicator, this wasn't reflected on the price, and the price did not make a new low. This is the best place to open a buy trade, since it's even in an up-ward trend there's no need to wait for a confirmation trading signal, because you're buying in an up-ward trend.

Example 4: Hidden Bearish Divergence Setup

Hidden Gold Bearish Divergence trading setup signifies a retracement in a down-wards trend.

Stochastic Indicator Hidden Gold Bearish Divergence

Hidden gold trading bearish divergence trading setup is the best type of divergence to trade, because you aren't trading a price trend reversal, but you are trading within the direction of the market trend. This is the best place to open a sell trade, since it is even in a downward trend there's no need to wait for a confirmation trading signal, because you are selling in a downward trend.