Trading Divergence

Beginner Questions
1

Hello all.

I’m trying to better understand trading divergneces in price and a indicator. I know the are very power signals but I do understand how they are traded.

For example, I am going to use MACD histogram as the indicator for the divergence. Say price is on the rise and MACD histogram makes a new high and then prices make a new high with a lower top on MACD. You, as a trader, see divergence but where would you know to go short? I have seen times price would rise again with another lower top on MACD and yet again price will rise to another high with a another lower MACD top. How do you know when to get in with these divergneces?

Thanks

Adam

2

I also trade divergences but I use stochastic to determine the overbought and oversold levels, and moving averages crossover and RSI to confirm the trend when it crosses 50. Of course the fundamentals should already be in place

3

I will also like to know more about this theme.