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Chapter 18, Part II. Trading Divergences. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    5. Another confirmation of bearish bias has come from MACD. It is not just showing us divergence and a bear trend, it also shows that trend holds bearish during the right shoulder of the small H&S pattern. Hence, we can enter right from the 0.618 resistance of the head to neckline swing.

    So, as you can see, we do not rely here on divergence solely. Divergence is just an indicator, because it does not give us clear areas where to enter and where to place a stop. We should analyze the situation within the overall view.

    So, what we do have:

    1. Daily overbought and Fib resistance;

    2. Hourly bearish divergence;

    3. Small H&S;

    4. Hourly trend is bearish and holds bearish at entry point.

    Take a note that our stop placement here is absolutely logical. If the market will erase H&S and move above the head, then trend will turn bullish and the divergence will be under question also. It is needless to say here that H&S will fail, so that area for placing stops is absolutely proper.

    The current chart shows that our trade will turn to profit, but even if divergence will fail, our entry here was correct, because we had a bearish bias and acted accordingly. You have to do the same type of work any time when see divergence.
    Chart #2 | 60-min EUR/USD and hidden bullish divergence

    Chart #2 shows us hidden bullish divergence – while MACD shows strong momentum down and creates new low – market does not confirm that and sellers could not push price lower. This is a bullish sign.
    #1 Sive Morten, Dec 21, 2013
    Lasted edited by : Apr 16, 2016
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