Hidden Bullish and Metals Hidden Bearish Divergence Metals Trading

Hidden divergence is used as a possible sign for a metals trend continuation after the metals price has retraced. It is a trading signal that the original metals trend is resuming. This is best setup to trade because it is in the same direction as that of the continuing market trend.

Metal Hidden Bullish Divergence

This setup happens when metals price is making a higher low ( HL ), but the oscillator (indicator) is showing a lower low (LL). To remember them easily think of them as W-shapes on Chart patterns. It occurs when there is a retracement in an upwards Metals trend.

The example illustrated & described below shows an image of this metals setup, from the image the metals price made a higher low (HL) but the indicator made a lower low (LL), this shows that there was a diverging signal between the metals price and indicator. This signal shows that soon the metal market up metals trend is going to resume. In other words it shows this was just a retracement in an upward metals trend.

This confirms that a retracement move is complete and indicates underlying strength of an upward metal trend.

Metals Hidden Bearish Divergence

This setup happens when metals price is making a lower high ( LH ), but the oscillator is showing a higher high (HH). To remember them easily think of them as M-shapes on Chart patterns. It occurs when there is a retracement in a downward Metals trend.

The example illustrated & described below shows an image of this metals setup, from the image the metals price made a lower high (LH) but the indicator made a higher high (HH), this shows that there was a divergence between the metals price & indicator. This shows that soon the metal market down metals trend is going to resume. In other words it shows this was just a retracement in a downwards trend.

This confirms that a retracement move is complete and indicates underlying strength of a downwards metal trend.

Other popular indicators used are CCI indicator (Commodity Channel Index), Stochastic Oscillator, RSI and MACD. MACD and RSI are the best technical indicators.

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

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

Combining Hidden Divergence with Moving Average Crossover Method

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

Moving Average Crossover Method

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

By combining this metals signal with other technical indicators this way one will avoid whip-saws when it comes to trading this metals trade signal.

Combining with Metals Trading Fib Retracement Levels

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

Because the hidden divergence is just a retracement in an upward metals trend we can combine this metals signal with most popular retracement tool that is the Fibonacci retracement levels. The example illustrated and explained below shows that when this metal trading setup appeared on chart, the metals price had just hit the 38.2% level. When metals price tested this level, this would have been a good level to set a buy order.

Combining with Metals Trading Fib Expansion Levels

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

The Fibonacci expansion was drawn as shown on the metals chart as illustrated & shown below.

For this example there were three take profit levels:

Expansion Level 61.80% - 131 pips profit

Expansion Level 100.00% - 212 pips profit

Expansion Level 161.80% - 337 pips profit

From this strategy combined with Fibo would have provided a good strategy with a good amount of profit set using these take profit areas.