Hidden divergence is a powerful signal if we manage it correctly. H1 time frame is more reliable to detect divergence other than M15 or lower time frame. The example below showing a nice CCI divergence signal on USDJPY H1 time frame. We trade after a trendline is broken.
Spotting divergence is pretty easy but how to trade it is the most important thing. Trend line break is a good confirmation since it does not affected by any price movement. The trend line represent the support and resistant zone on the price. By the theory, when the price break this line, it will continue to move along with it.
On the chart, price made higher low but the CCI made lower low. This condition is known as hidden divergence. On a bullish hidden divergence as above, draw a trend line connecting high. When price break this line, it will move up. Adjust your take profit and stop loss accordingly.
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