How Do I Trade Hidden Bullish and Hidden Bearish Divergence

Hidden divergence trading set-up is used as a possible sign for a price trend continuation after the market price has finished retracing. It is a signal that the original XAUUSD trend is resuming. This is the best divergence trading setup to trade because its signal is in the same direction as that of the continuing trend.

Hidden Bullish Divergence

This hidden bullish divergence setup happens when the price is making a higher low (HL), but the trading indicator is showing a lower low (LL). To remember easily think of them as W shapes on the price charts.

Hidden divergence signal occurs when there is a retracement in an upward gold price trend.

The example below shows this setup - from the screenshot the price made a higher low (HL) but the trading indicator made a lower low (LL), this shows that there was a hidden divergence trading signal between the Gold price & the indicator. This hidden divergence trade signal shows that soon the market upward trend is going to resume. In other words it shows this was just a retracement in an upward trend.

How to Trade Hidden Bullish Gold Trading Divergence on XAUUSD Charts - Gold Trading Hidden Bullish Divergence Setups

Hidden Bullish Divergence Trading Signal - Gold Trading Chart

This hidden bullish divergence trading signal confirms that the retracement move is complete & indicates the under-lying strength of an upward trend.

Hidden Bearish Divergence Setup

Hidden bearish divergence trading setup occurs when the price is making a lower high (LH), but the trading indicator is showing a higher high (HH). To remember them easily think of them as M shapes on price charts.

Hidden bearish divergence trading setup occurs when there is a retracement in a downward trend.

The example below shows the hidden divergence trading setup - from this example the XAUUSD price made a lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the Gold price & the indicator. This shows that soon the market downward trend is going to resume. In other words it shows this was just a retracement in a downwards trend.

How to Trade Hidden Bearish Gold Trading Divergence on Gold Trading Charts

Hidden Bearish Divergence Setup Signal - XAUUSD Chart

This hidden divergence trading setup confirms that a retracement move is complete and indicates under-lying strength of a downwards trend.Other popular trading indicators used are Commodity Channel Index CCI trading indicator, Stochastic Oscillator Indicator, RSI and MACD. MACD and RSI are the best indicators.

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

However, a xauusd trader should combine this setup with another indicator like the stochastic oscillator or moving average crossover method & buy when the indicator is showing the XAUUSD price is oversold & price has left this region, and sell when the trading indicator is showing Gold price is over-bought and the price has left this region.

Combining Hidden Divergence Setup with MA Crossover Method

A good technical indicator to combine these hidden divergence trading setups is the MA trading indicator using the moving average cross over trading strategy method. This will create a good trading strategy for generating trading signals and confirming these trading signals before trading them.

How to Trade Hidden Gold Trading Bullish Divergence & Hidden Gold Bearish Divergence Combined with Moving Averages

Moving Average Cross-over Method - Gold Trading Strategies

In this trade strategy, once the divergence signal is given, a xauusd trader will then wait for the MA crossover strategy to give a buy or sell trading signal in the same direction:

If there is a bullish divergence trading setup between the price & indicator, wait for the moving average crossover method to give an upwards cross-over signal before opening a buy position.
While for a bearish divergence trading setup wait for the moving average crossover method to give a downwards bearish cross over signal before opening a sell trade position.

By combining this hidden divergence trading set-up with other trading indicators this way, a trader will avoid fake outs when it comes to trading XAUUSD metal using this divergence trading set-up.

Combining Hidden Divergence Trading Signal with Fib Retracement Levels

For this example we shall use an upward market trend. We shall use the MACD.

Because the hidden divergence trading setup show that the current price move is just a retracement in an upward trend we can combine this divergence trading signal with the most popular retracement tool that's the Fib retracement levels.

The example below shows that when this hidden divergence trading setup appeared on the Gold price chart, the price had just hit the 38.2% Fib retracement level. When price tested this Fib retracement level - this would have been a good level to open a buy order.

How to Trade Hidden Bullish Gold Divergence & Hidden Bearish Gold Trading Divergence Combined with Fib Retracement

Combining Hidden Divergence Trading Signal with Fib Retracement Levels

Combining Hidden Divergence Setup Signal with Fib Extension Levels

In the above example once the buy trade was opened, a gold trader would then need to calculate where to place their takeprofit for this trade transaction. To do this a xauusd trader would need to use the Fibonacci Expansion Levels.

The Fibonacci extension levels were drawn on the price chart as shown below.

How to Trade Gold Hidden Bullish Divergence & Gold Hidden Bearish Divergence Combined with Fib Expansion Indicator

Combining Hidden Divergence Trading Signal with Fib Extension Levels

For this example there were three take profit order levels:

Fibonacci Expansion Level 61.8 %
Fibonacci Expansion Level 100.0 %
Fibonacci Expansion Level 161.8 %

Using this hidden divergence trading strategy combined with Fibonacci tools would have provided a good trade strategy with a good amount of profit set using these Fibonacci extension levels take profit levels.

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