Sorry for my previous post, the title and the content does not match. It should be a normal divergence not hidden divergence and I was using MACD Histogram indicator on that post, not CCI. OK, now I want to write about a good setup entry based on Hidden divergence spotted on GBPUSD M15 time frame on 29 May 2013. Hidden divergence is a good way to ride the trend on the current time frame. As always, trendline breakout was used to confirm the divergence. If you understand fibonacci retracement, you can also use this tool to confirm the divergence.
OK on the picture above, GBPUSD move up and break the upper Bollinger Bands. Since we do not trade the Bollinger Bands squeeze system, we do not enter the trade when price break up. We wait the retracement and see if we can enter the trade and hope the trend will continue to move up.
When price retrace, the indicator (MACD Histogram) made a lower low but the price still make higher low. This condition is known as a hidden divergence. You can use trendline break to confirm or use Fibonacci retracement tool. As you see, the retracement held by level 61.8 fibonacci and only make a tail and not close below the 61.8 level. We can go long here with stop loss put under the 61.8 level.
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