I love hidden divergence which has given me more profits each days. This post will show you a nice hidden divergence setup on USDJPY 17 June 2013. I use M15 time frame to enter my position. I saw USDJPY has made a nice up trend. The idea is to follow this uptrend. How to trade along with the current trend? The key is to spot hidden divergence. Hidden divergence by theory will continue the trend. As usual, I use a trendline breakout to confirm the hidden divergence.
Indicator:
- Stochastic Oscillator (9,3,3)
On the chart above, USDJPY has made new up trend. To catch the trend and trade it. Compare the low and higher low shown with white dotted arrow with the Stochastic. The price has made higher low but the Stochastic made lower low. This condition is known as hidden divergence.
To trade, draw a trendline connecting highs (lighter arrow). When the price break the trendline, open Buy. Put the stop loss below the previous low.
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