In this blog we are going to tell you about Divergence Cheat Sheet in Forex Trading, so read this blog carefully to get the complete information.
Trading in the stock market becomes easy if as a trader you understand different indicators and technical analysis. These indicators and technical analyses can help you in attaining desired results. One such popular technical analysis in trading is Divergence. In this guide, we will tell you more about this technical analysis and Divergence Cheat Sheet in Forex Trading in detail.
What is Divergence in Forex Trading?
Divergence refers to the price movement procedure when the price of an asset moves in the opposite direction of a technical indicator which is usually an oscillator. Divergence alerts that the current price trend may get in a price-changing direction.
Divergence implies that the ongoing trend can either continue or there can be a reversal in the trend as well. This interpretation becomes more useful when a trader knows what type of divergence is used in which situation.
About Divergence Cheat Sheet in Forex Trading
In the Divergence Cheat Sheet, you will get a video, a free mt4 divergence indicator, and information on how to use divergence situations when the asset price moves in one direction and the oscillator moves in another direction.
Mainly, there are two types of divergence which are Regular Divergence and Hidden Divergence. The divergence indicates different predictions so understanding them eventually can act as a divergence cheat sheet for the trader who is using it.
What does it mean by Divergence Bias?
Before knowing more about cheat sheets, it is important to understand the term ‘Bias’ in divergence. Any prediction that may occur due to the above-mentioned divergences will have a bearish or bullish bias. So Bias refers to the strong signal that the divergence is generating. In addition to this, it becomes more understandable when you will learn about the two types of divergences.
Divergence Cheat Sheet in Forex Trading
The following is the cheat sheet to help a trader understand the hidden divergence and the regular divergence in a better way:
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1. Cheat Sheet for Regular Divergence
Regular divergence gives a sign of an expected reversal in the current direction. The standard divergence bias predicts how the possible reversal may take place. There are two types of regular divergence bias which are mentioned below so that you can know what they indicate:
- Regular Bullish Divergence: In this case, the market displays the security price at a lower low, but the oscillator shows a higher low. This condition implies that the bearish trend is losing its power, and a possible bullish trend is taking a strong position. Hence, the chance of a trend reversal from bearish to bullish.
- Regular Bearish Divergence: The other case is when the market reflects the price at a higher high, but the oscillator shows a lower high. This condition is bearish bias as it implies that the bullish trend is no longer dominant, and the bearish trend may take over. Thus, there is a possibility of a trend reversal from bullish to bearish.
2. Cheat Sheet for Hidden Divergence
Unlike the Regular Divergence, the Hidden Divergence infers that the current trend may proceed. The bias of hidden divergence implies in which direction the trend is likely to continue. The following are the two types of hidden divergence bias mentioned below along with what they indicate:
- Hidden Bearish Divergence: When the price displays a lower high, but the oscillator shows a higher high, in such a condition the trader can expect the situation to be bear biased. The bearish or downward trend is predicted to continue and in such cases, the traders take selling positions.
- Hidden Bullish Divergence: When the market price of the security is at a higher low, but the oscillator shows a lower low such a trend is bull bias. In this condition, the trader can expect a bullish or upward trend and this is an ideal time for traders to enter or re-enter the market.
Table to Understand Divergence Cheat Sheet
Here is the table to understand and remember Divergence Cheat Sheet in a better way:
| Type of Divergence | Price | Oscillator | Trend |
| Regular Bullish Divergence | Lower Low | Higher Low | Bearish to Bullish |
| Regular Bearish Divergence | Higher High | Lower High | Bullish to Bearish |
| Hidden Bullish Divergence | Higher Low | Lower Low | Bullish Trend Continuation |
| Hidden Bearish Divergence | Lower High | Higher High | Bearish Trend Continuation |
Why should traders use RSI oscillators for divergence?
Divergence is always displayed by an oscillator which is used in technical analysis. RSI or relative strength index is one of the most famous oscillators which is used to identify divergence in trading. There are other oscillators present as well which are used to identify divergence but our si is among the best because of its following features:
- Divergence in RSI is easy to identify because of a single line with 14-period historical data.
- Another reason which makes this RSI oscillator more accurate for divergence is its ability to find out overbought and oversold prices.
- RSI has 30 and 70 levels which make it easy to identify divergence in oversold and overbought prices.
The final words
Understanding Divergences is not very confusing as by reading and with little practice, traders can use divergence to make predictions in the market. But, it is important to know that using a technical oscillator is essential for making these right predictions. Without an indicator or oscillator, the trader can not confirm the movement of the trend. In addition to this, it becomes even more important when you are using a momentum oscillator like RSI (Relative Strength Index), CCI (Commodity Channel Index), or Williams %R. We will recommend you read the two types of divergences and their biases to predict the security or commodity market. And then only the cheat sheet can help the trader to confirm their entry or exit from the market and it will make decisions easy as per the predictions.
We hope you found this guide helpful and understood the term divergence along with the types of divergence and divergence Cheat sheet in Forex trading.
Conclusion
We Hope this blog is sufficient enough to provide the information about Divergence Cheat Sheet in Forex Trading. Thanks for reading this blog.