S&P Emini Hidden Divergence The Silent Thriller

This is the simple trade setup of hidden bullish divergence. It works and it will always work if you will trade divergence with a proper confluence. Trading hidden divergence alone will not make you a profitable trader but it will hit your psychology because of trading without stop loss. Here, the RSI pushed above the line, implying bullish momentum. It was time to look for continuation trade setups.

What is the difference between RSI and RSI divergence?

An RSI divergence occurs when price moves in the opposite direction of the RSI. In other words, a chart might display a change in momentum before a corresponding change in price. A bullish divergence occurs when the RSI displays an oversold reading followed by a higher low that appears with lower lows in the price.

Though, divergence is typically used by technical traders when the price is moving in the opposite direction of a technical indicator. Cory Mitchell, CMT is the founder of TradeThatSwing.com. He has been a professional day and swing trader since 2005. pacific financial derivatives review Cory is an expert on stock, forex and futures price action trading strategies. If you review the examples above, you’ll find a few regular divergences as well. Regular divergences point to reversal, while the hidden ones get you into pullbacks.


Again, this bearish hidden divergence turned out to be the start of a big downward market move. In this example, the indicator does all the hard work and detects these 2 hidden divergences for you. If you’ve been trading for some time, you should already be familiar with regular divergence which many experts consider the best way to trade reversals. Wait for the price to come to the support zone and analyze the price action on the support zone by formation of a bullish candlestick pattern on support zone. The accumulation/distribution indicator (A/D) uses volume and price to assess the strength of a stock’s price trend and spot potential reversals.

Two subsequent lows or highs where the histograms have not returned to the zero line are not proper divergences. Often enough if a trader would zoom in 1-time frame a proper divergence would become noticeable there. The action is moving at a less stable/sustainable pace and the likelihood of a correction or reversal increases. The divergence-convergence analysis measures the power a currency has at one point in time with another point in time. The analyst can then judge whether the currency is showing signs of strength or weakness.

Not only that, you’ll also know the exact direction of that pattern – whether it’s bullish or bearish. And you’ll know exactly how long ago that particular setup showed up. The Hidden Divergence Pro indicator works equally well for day traders, swing traders, and long-term traders… The indicator uses 2 unique trend direction filters to make sure it filters out as many false signals as possible.

Example #1: Looking For A Hidden Divergence

Hidden divergence is a sign of trend continuation, while regular divergence is a sign of trend reversal. The idea is that regular divergence shows momentum leaving the trend, which could be an early sign of a reversal. Hidden divergence shows momentum coming into the current trend, which makes a continuation more likely. Hidden divergence vs regular divergence – what’s the difference? Either type of divergence can provide a powerful edge with the right trading strategy. In this article, I’m going to show you the difference between hidden divergence and regular divergence.

hidden divergence

That brings me to my last point… only take obvious patterns. It may have worked out, but the obvious patterns are the high probability patterns. There are many reasons for this, which I won’t get into now. They’re not all going to be textbook examples, but don’t force anything just to take a trade. There is a lot I could say about this, but I’ll try to keep it short and simple.

Rule 2: Only Connect the Lows for Bullish Hidden Divergence

The most useful way to use a momentum indicator is to know what strategy to use. Price will lead the way, but momentum can indicate a time to preserve profits. The skill of a professional trader lies in their ability to implement the correct strategy for price action. Divergence indicates something is changing, but it does not mean the trend will reverse.

What does hidden bullish divergence indicate?

The emergence of a hidden bullish divergence represents a signal that the prior uptrend is likely to continue. The hidden bullish divergence is presented in this setup below. Here, we can see that the RSI formed lower lows at the same time the price formed higher lows.

Hidden divergence will appear in both bullish and bearish directions. The examples above using Bitcoin are great illustrations of bullish hidden divergence. Hidden divergence is different from regular divergence due to the location of the pattern. Hidden divergence tends to occur within an existing trend.


You get Integrated Group Analysis, Built-in Trading Strategies, 150+ Indicators, Live Broker and Paper Trading, and so much more with VisualTrader. When a trend line has been identified, it can used to identify areas of potential support or … Hidden divergence can also signal a deeper correction.

Chart pattern is currently forming a Bear pennant with a target of 148. While there seems to be some drama regarding Parity, as far as I can tell,… The hidden divergence leans towards sacrificing the number of trades for low-risk entries.

Set and Forget Indicator

And you can practice trading with divergences as long as you wish. Similarly, the bullish divergence is more meaningful when it appears near the support trendline or when there is a bullish reversal pattern on the price fall. When the bearish divergence appears near the resistance trendline or there is a bearish reversal pattern in the uptrend, it becomes more significant. Below, you will find the exemplary chart for the bearish classic divergence. This is the divergence and a signal that the trend will soon reverse. The oscillators are used because they are leading indicators.

The hidden bullish divergence is presented in this setup below. Figure 7 shows a divergence that leads to sideways price action. Notice the weakening momentum in moving average convergence divergence as price enters a range. This signals the trader should consider strategy options. When price and the indicator are inconsistent relative to each other, we have a disagreement, or divergence. Bullish and bearish hidden divergences are powerful patterns seen at the end of consolidation.

And, not just that, but also the profit potential increases exponentially. Divergence can only exist if we have an ascending slope or descending slope either on the price action or on the indicator itself. Now, the same rules are applied to the bullish divergence, https://broker-review.org/ but in reverse. The swing high must correspond to an equivalent high on the indicator. Simply draw an imaginary vertical line from the price to the indicator, to rapidly spot the corresponding high points. Price action always gives the most up to date information.

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