What indicators are of best use when trading divergences?

Im working on a system (are’nt we all) and im trading divergence on a RSI, what else can i use to confirm a divergence, is there another indicator i can use to confirm? I have tride using a stochastic to look for overbought/os levels but to no avail.

IMHO the MACD histogram is about the best for showing divergences.

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I’m with you on that one Mouse. Everyone’s going to have their favorites, and the naked chart traders will dog you all day long for even using indicators.

Using indicators as leading indicators and solely for trades IMHO is a mistake, yes they lag, bla bla bla, you’ll hear it a million times, but if you use indicators for confirming trend and direction, they’re fine. MACD histogram in particular is fantastic for reading trends. Of course MACD is also great for divergence. While it won’t always catch a reversal, seeing divergence will at least catch your attention alert you with plenty of time if theres a change in direction. Some people will use support/resistance lines for this. Why not use both? Divergence when we approach support/resistance, uhh ohh it’ll help you more than hurt you if you use the indicator correctly.

I dont mean indicators to calculate divergence i mean indicators to confirm it maybe? so do your divergence on MACD but something else to confirm the reversal

What i mean is i have been trading divergences and i spot alot of them however not all of them do as predicted resulting in loss however some do exactly what i expect and i reap in the pips. How do i wittle the good spots down?

Be careful when reading divergences. I have been spotting a few the past 3 days or so. I have been using the Stochastic and RSI just to reconfirm the liquidity of the market. Most seem to use MACD.

Good luck!

That’s the nature of divergences. Sometimes it takes three or four consecutive ones for price to follow through. There’s no way to know how many. All you can do is apply good risk management for the times it doesn’t. If you’re trading during a dead time of the day, price might not react at all. One thing you might look for is, in say a bullish divergence, when price makes the first higher low and buy at that point.

How about spotting divergences using no Indicator at? Use the cable and fiber look for divergences there or the Aussie and the Kiwi. Using price is and will always be the best way to go. Stochastic does work I have never had much luch with MACD or RSI not saying they dont work just not for me

Pretty much any Oscillator will let you identify divergence. personally when looking at divergence with an oscilator (which is not that often these days) i use stochastic. You can however use as bobmaniac has mentioned highly correlated pairs and look at the divergence between them and also use the USDOLLAR Index to measure divergence as well.

As with all things look for some confluence within the charts, so is the divergence taking where price is near a known level of support or resistance and are the candle formations of the price hinting towards a change of direction.

I’m always wary of using indicators to very indicators. I prefer to confirm an indicator by using price actioin and support and resistance.

Hope this helps


My favorit is Stochastic, but if Divergence is going to be the trade trigger for your system, you may want to use a second indicator like RSI, sometime divergence will show on one indicator and not the other, having both indicators in agreement would be a strong signal. Just remember divergence can last a long time before the trend changes

Hi Guys, I have an auto MACD divergence indicator always on my charts. It sits minimised until it activates an alert and then I bring it up to have a look. It is of course, not 100 %. What is ? But is a good reminder and draws the attention.

Hmmm . . . can’t attach an mq4 file so have zipped it. Guaranteed OK.

If you google for divergence.mq4 you will likely find heaps of indicators. I have another which optionally allows RSI, CCI or MACD, maybe others, I don’t remember. I use MACD settings of 6, 12, 4 rather than the normal 12, 26, 9 but feel free to experiment. Remember that such an indicator only tells you divergence is likely. It does not tell you when to take a trade. I often therefore, set an alarm level and if price goes there I will review the viability of the diverging signal. Can catch some nice action but, never guaranteed. Caveat emptor.

FX5-MACD-Divergence-V1.1.zip (2.26 KB)

Rsi paint indicator

I personally use the MFI (Money Flow Index).

It couples volume with price which provides a much better look into market depth and filters out false overbought/oversold at a much higher rate than Stoch/RSI/MACD.

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I am very interested in this subject.

Is there anyone here on the forum who trades divergences as a strategy willing to share his/her results?

Thanks for this. Will check it out.

would u share the indicator with me pls? my email is anu730@ yahoo.com

[QUOTE=Braam de Villiers;367971]Thanks for sharing.

Done! Have a nice day! :slight_smile:

thx for ur sharing.