Trade Stock Indices

Hidden Bullish & Indices Hidden Bearish Divergence Indices Trading

Hidden divergence is used by traders as a possible sign for a indices trend continuation after the stock indices trading price has retraced. It's a signal that the original indices trend is resuming. This is best setup to trade because it is in same direction as that of the continuing market trend.

Indices Hidden Bullish Divergence

This setup happens when stock indices price is forming a higher low ( HL ), but the oscillator (indicator) is showing a lower low (LL). To remember these setups easily think of them as W shapes on Chart patterns. It forms when there is a price retracement in an up-wardupwards Indices trend.

The example explained and illustrated below shows an image of this indices formation, from the image the stock indices price made higher low (HL) but the indicator made a lower low (LL), this displays that there was a diverging signal between the stock indices trading price & indicator. This trading signal displays that soon the stock indices trading market up indices trend is going to resume. In other words it portrays this was just a retracement in an up-wardupwards indices trend.

How to Identify Hidden Bullish and Hidden Bearish Divergence Setups

This confirms that a market price retracement move is exhausted & illustrates the underlying strength of an upward indices trend.

Stock Indices Trading Hidden Bearish Divergence Pattern

This setup happens when stock indices price is forming a lower high ( LH ), but the oscillator is showing a higher high ( HH ). To remember these setups easily think of them as Mshapes on Chart patterns. It forms when there is a retracement in a downward Indices trend.

The example explained and illustrated below shows an image of this indices formation, from the image the stock indices trading price made lower high (LH) but the indicator made a higher high (HH), this displays that there was a divergence between the stock indices trading price & the indicator. This displays that soon the stock indices trading market down indices trend is going to resume. In other words it portrays this was just a retracement in a downward trend.

How Do I Identify Hidden Bullish and Hidden Bearish Divergence Setups?

This confirms that a market price retracement move is exhausted and indicates underlying strength of a downward indices trend.

Other popular technical indicators used are CCI indicator (CCI), Stochastic Oscillator, RSI and MACD. MACD and RSI Indicator are the best indicators.

NB: Hidden divergence pattern is the best type divergence pattern to trade because it gives a signal that's in the same direction with the current market price trend, thus it has a high reward to risk ratio. It provides for best possible entry.

However, a trader should combine this stock indices trading setup with another indicator like the stochastic oscillator or moving average & buy when indices is oversold, and sell when indices is overbought.

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Combining Hidden Divergence Pattern with MA Crossover Strategy Method

A good technical indicator to combine these indices trading setups is the moving average indicator using moving average cross over technique. This will create a good trading strategy.

Moving Average Crossover Strategy Method

Moving Average Crossover Technique

In this method, once the trading signal is given, a trader will then wait for the moving average cross over technique to give a buy/sell stock indices signal in the same direction, if there is a bullish divergence set up between the stock indices price & indicator, wait for the moving average crossover system to give an upwards crossover trading signal, while for a bearish diverging pattern wait for the moving average crossover trading system to give a downward bearish crossover trading signal.

By combining this stock indices signal with other technical indicators this way one will avoid whip-saws when it comes to trading this indices trade signal.

Combining with Indices Trading Fib Retracement Levels

For this example we shall use an upwards market trend. We shall use MACD indicator.

Because the hidden divergence setup is just a retracement in an up-wardupwards indices trend we can combine this stock indices trading signal with the most popular retracement tool that is the Fib retracement levels. The examples explained below portrays that when this stock indices trading setup appeared on chart, stock indices trading price had just hit 38.20% level. When stock indices trading price tested this level, this would have been a good level to place a buy trade order.

Indices Trading Hidden Bullish Divergence on Upward Indices Trend Combined with Fibonacci Retracement

Combining with Indices Trading Fibonacci Expansion Levels

In the stock indices trading example above once the buy indices trade was placed, a trader would then need to calculate where to put the take profit for this trade. To do this one would need to use the Indices Trading Fibonacci Expansion Levels.

The Fibo expansion was drawn as shown on stock indices chart as illustrated & shown below.

How to Identify Indices Hidden Bullish and Indices Hidden Bearish Divergence Indices Setups

For this example there were 3 take profit areas:

Expansion Level 61.80% - 131 pips profit

Expansion Level 100.00% - 212 pips profit

Expansion Level 161.80% - 337 pips profit

From this strategy combined with Fibo indicator would have provided a good trading strategy with a good amount of profit set using the take profit order levels.