Omg is so hard to learn FOREX ,I am a beginner and I tried to understand divergent concept ,but I still don;t get it… Can someone please help ME!!!
Divergence is another one of those terms that some people throw around and make sound important. I had a hard time finding out about it and then understanding it. Once I understood, I found that it is another event that happens on a chart that seems to indicate that something else is going to happen. The something else happens often enough that some traders attach importance to it. I however found it didn’t work any better than pin bars, MA crossovers or Bollinger Bands. So don’t spend much time on it. There is lots of other things to learn like support and resistance.
Very simple explanation would sound like:
- Price goes down + oscillator goes up (macd, stoch. etc.) = divergence
- Price goes up + oscillator goes down = divergence
Basically you can treat it as a difference it movement direction which will be sooner or later corrected by the market.
I agree with Codemeister, forget about it, it’s a waste of time, concentrate on S/R and price action.
Where about i can learn S/R and price action?
I love you’re hatred for all things indicator, hehe. Although actually divergence can tell you something usefull about price, but it’s certainly not a full proof system.
If you’re looking at oscillator indicators which try to calculate momentum (or the “force” with which price is moving) it can be useful to compate this momentum between two different prices at two different points in time. For example looking at a regular divergence, which is used to try to stop counter trend moves:
In this example the price has made a lower low (which is bearish) but the new low was created with weaker momentum than the previous low, suggesting that the downmove is weakening and perhaps a bullish move may occur.
Contrastly a hidden divergence is used to suggest that a trend may continue (these divergence are more accurate in my experience):
Here the price made a new lower high but the indicator is showing a more extreme momentum or oversold value than the previous low, this suggests that the trend may continue as the last upmove had more momentum that the previous upmove but failed to make a higher high, which we may infer as very strong selling pressure at this level keeping the price moving down.
Again it’s not an exact science and if you are interested in divergences I would look for “hidden” ones to confirm an entry with the trend rather than “regular” divergences against the trend. You should couple this with other indicators (like S/R, price action or an MA to find the trend) to confirm the divergence rather than just looking at it alone.
Love the graphics, and all very well in theory, but in practice it’s a NO!
Divergences can be usful but I only find them to hold any real ground when you find divergences in correlating charts like the fiber and the cable. Even then there has to be more there than just a divergence. A divergence by itself mean nothing like pretty much anything else. But when used with other signals it can be an ok tool.
Lol, I “stole” them from the babypips school 