Stochastic Oscillator Bullish Indices Divergence and Bearish Divergence Indices Trading
Divergence indices trading is one of the indices trading signals that can be generated when using the stochastic oscillator stock indices indicator.
Divergence indices trading is a signal that a rally or retracement is losing steam and is likely to reverse. It means that the last buyers or last sellers are pushing the stock indices trading price in one way while the majority of other indices traders have stopped trading in that direction and are cautious of a indices price correction or retracement.
There are four types of stock indices divergence trading setups
Example 1: Classic Stock Indices Bullish Divergence
A Indices Trading Classic Bullish Divergence in the stochastic oscillator indicator and the stock indices trading price is followed by a rise in stock indices trading price.
Stochastic Oscillator Indices Indicator Classic Indices Bullish Divergence
When the stock indices trading price is making new lows the Stochastic indicator is not moving past its previous lows it is an indication that the downward indices trend is about to reverse and a bullish indices trading rally is likely to occur.
In the stock indices trading example above the stock indices trading price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator stock indices indicator, when stock indices trading price formed a new low then the stochastic stock indices indicator should have followed suit, but the stochastic indicator did not therefore the indices trading classic divergence trading setup.
Indices classic divergence trading setup is even stronger because there is combination of a divergence indices trade setup and then followed by a rise above the 20% indicator level. This combines the Over-bought and Oversold levels with this stock indices divergence trading setup.
Example 2: Classic Indices Bearish Divergence
A Classic Indices Bearish Divergence trading setup in the stochastic oscillator stock indices indicator and the stock indices trading price is followed by a drop in stock indices trading price.
Stochastic Oscillator Indices Indicator Classic Indices Bearish Divergence
When stock indices trading price is making new highs but the Stochastic oscillator stock indices indicator is not moving beyond its previous high it is an indication the upward trend will reverse and that a indices trading bearish divergence trade setup will follow.
This classic indices trading bearish divergence trade setup is even stronger because there is a combination of a stock indices trading divergence with a dip below the overbought 80 level.
Example 3: Hidden Stock Indices Bullish Divergence
Hidden Indices Bullish Divergence trade setup signifies a retracement in an upward indices trend. This indices trading hidden divergence trading setup is the best type of stock indices trading divergence setup to trade, because you are not trading a indices trading price reversal, but you are trading within the direction of the Indices trend.
Stochastic Oscillator Indices Indicator Hidden Indices Bullish Divergence
Even though, the stochastic oscillator stock indices indicator made a lower low the stock indices trading price low was higher than the previous low (higher low). This means that even though the indices sellers made a good attempt to push stock indices trading price down as indicated by the stochastic indicator, this was not reflected on the stock indices trading price, and the stock indices trading price did not make a new low. This is the best place to open a buy indices trade, since it is even in an upward indices trend there is no need to wait for a confirmation indices trading signal, because you are buying in an upward Indices trend.
Example 4: Hidden Indices Bearish Divergence
Hidden Indices Bearish Divergence setup signifies a retracement in a downwards trend.
Stochastic Oscillator Indices Indicator Hidden Indices Bearish Divergence
Hidden indices trading bearish divergence stock indices trading setup is the best type of divergence to trade, because you are not trading a indices price trend reversal, but you're trading within the direction of the trend. This is the best place to open a sell indices trade, since it is even in a downward trend there is no need to wait for a confirmation indices trading signal, because you are selling in a downward Indices trend.
