Stochastic Oscillator Divergence Technical Indicator Silver Trading

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

Divergence on stochastic indicator is a signal that a rally or retracement is losing steam & is likely to reverse. It means that the last buyers or the last sellers are pushing the xagusd price in one way while majority of other traders have stopped trading in that way & are cautious of a xagusd price correction or retracement.

There are 4 types of divergence trade setups which can be traded using this divergence technical indicator.

Example 1: XAGUSD Trading Classic Bullish Divergence

A Bullish Divergence in stochastic technical indicator & xagusd price is followed by a rise in xagusd price.

stochastic divergence technical indicator

When the xagusd price is making new lows the stochastic divergence indicator is not moving past its previous lows it is an indication that the down silver trend is about to reverse and a bullish rally is likely to occur.

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

This divergence trading setup is even stronger because there is combination of a divergence & then followed by a rise above the 20% level. This combines the Overbought & Oversold levels.

Example 2: Silver Trading Classic Bearish Divergence

A Bearish Divergence in the stochastic technical indicator & xagusd price is followed by a drop in xagusd price.

stochastic divergence technical indicator

When xagusd price is making new highs but the stochastic divergence indicator is not moving beyond its previous high it is an indication the up silver trend will reverse and that a bearish divergence will follow.

This set-up is even stronger because there's a combination of a divergence trading setup with a dip below the over bought 80 level.

Example 3: XAGUSD Hidden Bullish Divergence

This stochastic divergence indicator setup signifies a retracement in an upwards trend. This is the best type of divergence to trade, because you're not trading a xagusd price silver trend reversal, but you are trading within the direction of the Silver market trend.

stochastic divergence technical indicator

Even though, the stochastic oscillator stochastic divergence indicator made a lower low the xagusd price low was higher than the previous low (higher low). This means that even though the sellers made a good attempt to push xagusd price down as indicated by the stochastic divergence indicator, this was not reflected on the xagusd price, and the xagusd price did not make a new low. This is the best place to buy silver, since it is even in an upward silver trend there is no need to wait for a confirmation signal, because you are buying in an upward Silver market trend.

Example 4: Silver Trading Hidden Bearish Divergence

This setup signifies a retracement in a downward trend.

stochastic divergence technical indicator

This is the best type of divergence to trade with this stochastic divergence indicator, because you are not trading a xagusd price silver trend reversal, but you are trading within the direction of the market trend. This is the best place to sell silver, since it is even in a down silver trend there is no need to wait for a confirmation signal, because you are selling in a downward Silver trend.