Divergence: examples. What is the divergence in the Forex market. Divergence indicator

The divergence, examples of which can often be seen on the graph in the terminal of the currency market, is a clear discrepancy between the value of the trading instrument and the indicators of the indicator. In other words, we can say that the signal on the indicator should be the opposite of that which usually appears when the price reaches a new high and low. In combination with strong levels, support and resistance lines, trend lines and other signals, the pattern can make a good profit. It can be called an integral part of effective trade. All indicators of the divergence "Forex", mainly oscillators, help to clearly identify the discrepancy, as they outpace the price movement. The signal is often used by both professional traders and novices. It allows you to conduct a general analysis of the state of the Forex market and warn about the upcoming reversal of the trend.

Types of divergence

Among the patterns of the Forex market, which appear on the charts more often than others, is the divergence. Examples of signals can be varied, which stimulated the emergence of several varieties of "inconsistency". The most common is the classical divergence. The model signals a sharp reversal of the trend.

It warns the trader of the reduction in momentum and the high probability of forming a new peak. For the classical (simple model) divergence, the following features are inherent:

1. Low minima on the price chart coincide with high highs of the oscillator indicators, which signals a trend reversal upwards. This is a clear model of the "bullish" divergence.

2. High highs on the price chart coincide with the low highs of the oscillator indicators, which signals a downward trend. This is a clear scheme of the "bearish" divergence.

Divergence of class A

Studying such a trading signal as a divergence, it is recommended to study the examples carefully. This will clearly distinguish two subtypes of the signal. Let's start with the divergence of class A. This is one of the strongest trading signals, which indicates a significant reversal of the main trend. With a "bullish" signal, the price of the currency draws a new high, the indicator forms a new low. The secret is that the high minimum does not have a strong momentum to continue the movement. With a "bearish" signal, the price forms a new high, and the indicator gives the opposite signal. To continue the movement of momentum is not enough.

Class B Divergence

Class B divergence is a weak type of signal. It can indicate a gradual change in the price movement. This signal requires confirmation. Opening of the transaction should be supported by auxiliary patterns. The "bullish" divergence is characterized by the formation of the figure "double bottom", and on the indicator - the formation of a high minimum.

The double base is an area of unstable equilibrium, where there is both the probability of continuation of the trend and its reversal. For the "bearish" divergence, it is characteristic to form a double peak on the chart and fix a new low maximum on the oscillator. It is worth considering the possibility that the price still has momentum for a short-term continuation of the movement.

Hidden divergence

Often a latent divergence is formed on the chart. Examples of its formation can be seen quite often. Unlike the correct pattern, the signal indicates the continuation of the trend. "Bullish" hidden divergence is visible when fixing the price of new lows on the chart and the formation of new bottoms on the indicator. "Bear" hidden divergence is characterized by the formation of low highs on the chart and the formation of high highs on the indicator. Signals can be effectively used for trading on a trend, since they allow you to determine the optimal entry point to the market.

Trade: basic settings

The divergence "Forex" can be identified by means of the MACD indicator built into the terminal. For a trading instrument, you need to set the following parameters:

• The fast period is 12;

• Exponential moving average - 26;

• Simple moving average - 9.

All parameters are applied to the closing levels. For trading, any currency pair and any timeframe can be used. The entry into a long position must be made when the price is in a "bearish" trend, and the MACD points to a "bullish" trend. Enter a short position when you need a reverse signal. "Stop" is set around the closest level of support for trading on long positions, and the nearest resistance level, if the trade is conducted on a short position. "Profit" is set to the next resistance level when opening long positions and to the next support level when opening short positions.

Specificity of trade

Considering such a pattern as a divergence, examples of it can be seen absolutely on all currency pairs and on all periods of time. Experienced traders associate this phenomenon in the market with the need for brokers to discard loss-making positions. The average frequency of signal occurrence is 3-4 times a month for each of the currency pairs. That is why the profitability of this instrument depends solely on the number of currency pairs that are used in trading. The signals are checked by the number of points between the vertices on the graph, both minima and maxima. Race should be from 25 to 50 points, depending on the pair. The more the run-up between the vertices in the points, the stronger the signal is.

Which indicator of divergence is the most effective?

In the classical economy, to search for divergences, it is customary to use the MACD indicator, which was described above. Methods for finding the pattern include using a stochastic indicator and OsMa. Experienced traders adapt for the search for divergences practically any of the indicator-oscillators built into the terminal. The divergence indicator can be installed separately. It will signal the appearance of the desired models on the chart, which will reduce the work of the trader.

Everyone has the right to choose the trade tool that will be most convenient for him to perceive visually. Noticing the formation of the pattern, you need to draw lines and connect the peaks of the highs and lows on both the indicator and the graph. This will determine the successful entry point to the market. On the chart, the divergence does not always look the same as in the pictures with examples. Figures can be subtle and distorted. Only a long experience in the market and tracking the process of working out the figure after a while will make it easy to identify it on the charts. Experts recommend, before starting trading on this signal, to study it in history. This will allow to adapt the visual perception of the market.

Important points, or Beginners note

Trade in divergence can be used for all time periods, but it is worth remembering that the more timeframe, the longer the price will go to its goal. Turning the trend can drag on for a long enough period of time. At low timeframes, you should be careful when using this tool. It often happens that by the time the model is fixed, a price reversal has already occurred. To minimize risks, it is recommended to compare divergence at different time intervals. This technique allows you to come to the fact that the divergence "Forex" brings the maximum possible profit.

The pattern is one of the few effective signals that are rational to use when trading against the trend. The signal is much stronger than the indicators of all other indicators, both purchased and embedded in the terminal. The signal is amplified for longer time periods. Effectively combine the divergence readings with the breakdown of trend lines.

Divergence in the sciences

Not only in the Forex market you can meet such a phenomenon as divergence. Evolution has led to the fact that the concept is considered one of the fundamental in physics. This is the basic concept of the theory, the foundation of almost the entire physical language. In accordance with classical science, the divergence is also central to it. Fields are considered to be not only the dominant tool in calculations, but also an important idea. It acts as a statistical backbone. The divergence of the rotor, field, flow of substances is widely applicable in most exact disciplines.

In electrodynamics, the divergence of the rotor is used as the basic construct in two of Maxwell's four equations. The main equation in Newton's theory of gravity in the field format contains a divergence. It also occurs in tensor theories, including in general relativity. In turn, general relativity is part of a large number of modern theories. The parameter is widely used in the geometric aspect. To the material flows, to the velocity of the flow of gases and liquid, to the density of electric current, divergence is applicable. The concept is very multilateral and managed to find its place even in the international currency market.