Hidden divergence happens when price has made a new trend (up or down) and hidden divergence indicates that the trend will continue. For example when price has made a new trend, breaks upper Bollinger Bands do not think to SELL too early. Its wiser to catch the trend by identifying any hidden divergence the at may occur on the chart.
On the chart above, price break the upper Bollinger Bands (20) and start making a new trend. If you cannot sail with this trend from the beginning, its better to wait the retracement completed and then get into the trend. The best way to join into the trend is by identifying any hidden divergence may occur on the chart. As picture above, I compared two lows which is higher low but the stochastic shows a lower low.
To enter the trade, create a trendline connecting highs. When price break this trend line, we open BUY position with confidence. Stop loss should be placed on the previous low. As you see, the price continue to resume the uptrend until there is a bearish divergence and price start to reverse.
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