Metals Trading Divergence Metal Trading SETUPS SUMMARY
Classic Bearish - HH metals price, LH indicator - Indicates underlying weakness of a metals trend - Warning of a possible change in the metals trend from up to down.
Classic Bullish - LL metals price, HL indicator - Indicates underlying weakness of a metals trend - Warning of a possible change in the metals trend from down to up.
Hidden Bearish - LH metals price, HH indicator - Indicates underlying strength of a metals trend - Mainly found during corrective rallies in a downward metal trend.
Hidden Bullish - HL metals price, LL indicator - Indicates underlying strength of a metals trend - Occurs mainly during corrective declines in an upward metal trend.
Illustrations of the divergence terms:
M-shapes dealing with Metals price highs
M-shapes
W-shapes dealing with Metal price lows
W-shapes
These are shapes to look for when using these metals trading setups.
One of the best indicator for this metal trading setup is the MACD Technical Indicator - as a metals signal MACD divergence is a setup to enter a trade. But as with any signal there are certain precautions that have to be observed to make this metals signal a set-up. Getting straight in to a trade as soon as you see this metal setup is not the best strategy. This setup should be used in combination with another technical indicator to confirm the direction of the metal trend. A good system to combine with is the moving average cross-over system.
Be aware this metal setup on a smaller timeframe isn't so significant. When divergence is seen on a 15 minute chart it might or might not be very important as compared to the 4 H chart timeframe on MT4 metal software.
If seen on a 60 minute chart, 4H chart, or daily chart timeframe, then start looking for other factors to indicate when the metals price may react to the divergence.
This brings us to a key point when using this metals signal to enter a trade: on a higher time frame MACD divergence can be a fairly reliable indicator of a change in metals price direction. However, the big question is: WHEN? That is why getting straight in to a trade as soon as you see this metal setup isn't always the best strategy.
Many investors get caught out by entering the metal market too soon when they see MACD divergence. In many cases, metals price has still got some momentum to continue in the current direction. The investor who has jumped in too soon can only stare at the screen in dismay as metals price shoots through his stop loss taking him out.
If you simply look for this metal setup without any other considerations you'll not be aligning yourself with the best odds, so to increase the odds of making a successful trade you should also look at other factors, specifically other indicators.
What other factors should you consider when using this Metal trading setup?
1. Support level, Resistance levels and Metals Trading Fibonacci levels on higher Metal Chart Timeframes
Another way to greatly increase the odds of a winning trade is to observe the higher chart timeframes before opening an order based on the lower time-frames.
If you observe that the hourly, 4 hour or daily Metals chart has met a major resistance, support or Fib level then the probability of a successful trade based on divergence on a lower time-frame at this point increases.
2. Reward to Risk Ratio: Metal Trading Money Management Rules
And finally, when looking for divergence, it is very important that you enter the trade correctly, so that you've a good risk/reward ratio and only open metals trade transactions which have more profit potential than what you are risking. If you understand how to enter a transaction properly, you can measure your risk/reward before you open a transaction. That way, you can only choose to open orders that offer a favorable ratio.
Finally, when used correctly & combined with other technical indicators to confirm this metals trading signal, divergence setup can provide for a huge profit potential.
