Good hidden divergence trading setup on EURJPY 26 July 2013

This post is a back test which is for learning process only. I could not write the post when price still running because I have to manage and take care of my own trading. I hope this post can give a better visualization for future trading setup using hidden divergence strategy. Starting from early morning of 26 July 2013, EURJPY has made a strong down trend. This down trend was confirmed by the price moving below 50 EMA on M15 time frame.

This strategy is to follow the trend with hidden divergence confirmation. The stop loss should be placed few pips above the previous high (on a down trend). My suggestion is to put the stop loss a bit wider because sometimes price made a spike and hit your stop loss if you put it too tight. I usually put the stop around 20 pips because 20 pips with 0.1 standard lot is my risk on every position I took. I don't want to lose more than 20 dollar on each trade.

I also do not use Take profit when I am in front of my laptop. I will manually move my stop loss when I am floating in profit. By doing this, I can maximize my profit. I move my stop loss to break even when I am in 10 pips winning position. By doing this I can minimize my losing chance.

Trend following trade with hidden divergence confirmation

Trend following is the safest and is the most popular trading strategy among traders in the world. The idea here is to ride the current trend in selected time frame with hidden divergence confirmation. The following indicators are needed:

• MACD (default setting)
• EMA 50
• Stochastic oscillator (default setting)

Entry rule:

• When price is above the 50 EMA, we only go Long. When price is below 50 EMA we only take Short position.

Long entry:

When MACD bars are above the zero line and price is above the 50 EMA, it indicates that the current trend is UP. We try to catch the trend by identifying the hidden divergence on Stochastic. See example below

 

Bullish divergence on USDCHF 17 July 2013

A nice bullish divergence was developed on USDCHF pair on 17 July 2013. After few days USDCHF made a nice down trend, today I spot a bullish divergence on hourly time frame.

Compare my dotted arrows on the price and on the indicator. The The discrepancy between the price and indicator develop a divergence. Price made lower low but MACD Histogram made a higher low. It's a bullish divergence.

I always use a trendline to help me open my trade. When the price break the trend line, I can open my trade confidently.

How to trade hidden divergence the right way

Hidden divergence is a powerful trading setup when we manage it correctly. The example below will show you how to trade hidden divergence the right way. Both normal or hidden divergence need a confirmation before it really a normal or hidden divergence. A good confirmation is the trendline breakout. And as my own experience, MACD Histogram is the perfect indicator to detect divergence. See example below (M15 time frame)

 

CCI Hidden divergence trading USDJPY H1 time frame

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.

 

CCI Hidden Divergence trading EURJPY 10 July 2013

I try to learn something for my trading experience. I am currently floating 60 pips because I do not care about hidden divergence on EURJPY 10 July 2013 on M15 time frame. It was my bad day :( I trade using my Android smartphone and I cannot load my favorite indicator MACD Histogram on it.

MACD Divergence trading setup

MACD is a powerful indicator if we use it properly. I only look for any normal divergence or any hidden divergence on the price. I never trade MACD for flip over or cross over only. Divergence must exist on every trades I took.

 

Hidden divergence trading AUDUSD M15 time frame 2 July 2013

I did not take all trading setup written on this blog. I am not a full time trader, so sometimes I missed the divergence signals. But I like to write any divergence signal on any pairs and time frames in order to sharpened my own trading system. This blog is more like a divergence trading journal for me.

 

AUDUSD Bullish divergence trading 3 July 2013 H1 time frame

At the first, I am not too sure when opening this position. I saw a nice Bullish divergence signal on H1 time frame at 3 July 2013. A pin bar bearish candle indicate that buyer is ready to take control over the seller. CCI indicator also showing a higher low to confirm the bullish divergence.

 

EURJPY Bearish divergence trading M15 time frame on 5 July 2013

Today is the first Friday of the month where US Non Farm Payroll is the most awaited Forex news of the day. EURJPY at the 5th July 2013 move up at the morning and MACD Histogram shows a bearish divergence. It's a good trade setup before the NFP news announced.

 

Bearish divergence trading setup EURJPY on 5 July 2013 M15 time frame

For a technical trading system, we do not care about anything else but the technical factors such as price movement, divergences, indicator cross over etc. Here I want to show a nice SELL position on EURJPY 5 July 2013 M15 time frame. There is a bearish divergence that is confirmed with a trendline break. This trade setup has given me about 90 pips profit.

 

Bullish divergence trading EURJPY 2 July 2013

EURJPY on 2 July 2013 was not move as volatile as usual. A sideway price movement was shown as there are not many important news on that pair. But, we have a nice divergence trading setup on EURJPY 2 July 2013 on M15 time frame. A Bullish divergence on CCI indicator has given us some green pips. See the chart below

 

CCI Divergence breakout on NZDUSD M15 time frame 28 June 2013

I love to write and learn about divergence on this blog. Here I want to show another example of CCI divergence with trend line breakout confirmation on NZDUSD 28 June 2013. I always use a trend line break confirmation to open and trade a divergence. And the following chart will explain how to trade CCI divergence.

 

USDCHF Divergence trading 28 June 2013 on M15 time frame

USDCHF on 28 June 2013 did not make any clear trend. It show a sideway movement all day. As usual, divergence trading can give us some nice pips for a divergence scalper like my self. The setup below show a bullish divergence trading on USDCHF M15 time frame on 28 June 2013. About 30 pips are secured.

 

Hidden Divergence trading setup AUDUSD 27 June 2013

USD shows its power compared to Australian Dollar on 27 June 2013. After making a nice up retracement, now AUDUSD is continuing to fell down. I found a nice trading setup on H1 spotted by a nice hidden divergence on CCI indicator H1 time frame.

 

MACD Histogram hidden divergence trading

MACD Histogram is a very lagging indicator and always late. That's why I do not recommend to trade using MACD Histogram flip or signal cross over. MACD Histogram is very powerful to detect divergence. Divergence fake out is less when using this indicator. Personally, I prefer to trade hidden divergence on any time frames. Since I am a scalper, I only look for 10-30 pips on each trades I take. Here is the example of the hidden divergence reading using MACD Histogram.

Indicators:

• MACD Histogram
• Bollinger Bands
• Simple Moving Average (60 period)

 

Bullish divergence signal NZDUSD 21 June 2013

I spot a nice Bullish divergence signal on NZDUSD pair on 21 June 2013 H1 time frame. Since its Friday, so we need to see it on next Moday 23 June 2013. MACD Histogram shows a nice divergence on the bottom and I hope the price will move up significantly or at least 30 pips in advance.

 

Hidden divergence trading EURUSD 21 June 2013

EURUSD current trend is down on H1 and lower time frame at least. And its time to ride the trend by identifying any hidden divergence on M15 time frame. The price has broke the lower Bollinger Bands and seems to continue and as usual, hidden divergence was there.

 

Bearish divergence trading EURJPY on 21 June 2013

I found a nice bearish divergence signal on EURJPY pair on 21 June 2013 M15 time frame which gave me +30 pips in advance. In last few hours, EURJPY trend is up about 130 pips. I cannot get into this potential trade because I do not watch the market. But when I open my MT4 I spot a bearish divergence which gave me a SELL signal as follow

 

Scalping with Stochastic hidden divergence

On this post I want to show you how to trade/scalp with a Stochastic hidden divergence signal. Its an interesting trading system with high probability profits. Even I cannot guaranteed that this system will work for you but at least it works for me so far. Hidden divergence often occur when price has made a new trend no matter its up trend or down trend. Then the price will enter the retracement process. Hidden divergence will give signal when the retracement process is finished and start to continue the trend. 

Below is the bullish hidden divergence on AUDUSD M15 timeframe.