Trading Divergences in Forex-BabyPipscom

Trading Divergences in Forex-BabyPipscom

Learn How to Trade Forex. A Beginner’s Guide to Forex Trading.

Skip to content

BabyPips.com > School > High School > Trading Divergences > Trading Divergences

  • Preschool
    0%

    >

    Preschool

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • What is Forex?

  • What Is Forex?
  • What Is Traded In Forex?
  • Buying And Selling In Currency Pairs
  • Market Size And Liquidity
  • Different Ways To Trade Forex
  • Why Trade Forex?

  • Advantages Of Forex Trading
  • Forex vs. Stocks
  • Forex vs. Futures
  • Who Trades Forex?

  • Forex Market Structure
  • Forex Market Players
  • Know Your Forex History!
  • When Can You Trade Forex?

  • Forex Trading Sessions
  • Tokyo Session
  • London Session
  • New York Session
  • Best Times of Day to Trade Forex
  • Best Days of the Week to Trade Forex
  • How Do You Trade Forex?

  • How to Make Money Trading Forex
  • Know When to Buy or Sell a Currency Pair
  • What is a Pip in Forex?
  • What is a Lot in Forex?
  • Impress Your Date with Forex Lingo
  • Types of Forex Orders
  • Demo Trade Your Way to Success
  • Forex Trading is NOT a Get-Rich-Quick Scheme
  • Kindergarten
    0%

    >

    Kindergarten

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • Brokers 101

  • History of Retail Forex Trading
  • Forex Broker Types: Dealing Desk and No Dealing Desk
  • Dealing Desk vs. No Dealing Desk Forex Brokers
  • 6 Crucial Things to Consider When Choosing a Forex Broker
  • Beware of Forex Bucket Shops
  • How to Protect Yourself Against Forex Broker Scams
  • How to Open a Forex Trading Account
  • Three Types of Analysis

  • 3 Types of Forex Market Analysis
  • Technical Analysis
  • Fundamental Analysis
  • Sentiment Analysis
  • Which Type of Analysis for Forex Trading is Best?
  • Types of Charts

  • 3 Types of Forex Charts and How to Read Them
  • Elementary
    0%

    >

    Elementary

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • Grade1
    Support and Resistance Levels

  • Forex Support and Resistance
  • Trend Lines
  • Channels
  • How to Trade Support and Resistance
  • Summary: Trading Support and Resistance
  • Grade2
    Japanese Candlesticks

  • What is a Japanese Candlestick?
  • Japanese Candlestick Anatomy
  • Basic Japanese Candlestick Patterns
  • Single Candlestick Patterns
  • Dual Candlestick Patterns
  • Triple Candlestick Patterns
  • Japanese Candlestick Cheat Sheet
  • Summary: Japanese Candlesticks
  • Grade3
    Fibonacci

  • Fibonacci Trading
  • How to Use Fibonacci Retracement to Enter a Forex Trade
  • Fibonacci Retracement is NOT Foolproof
  • How to Use Fibonacci Retracement with Support and Resistance
  • How to Use Fibonacci Retracement with Trend Lines
  • How to Use Fibonacci Retracement with Japanese Candlesticks
  • How to Use Fibonacci Extensions to Know When to Take Profit
  • How to Use Fibonacci to Place Your Stop so You Lose Less Money
  • Summary: Fibonacci Trading
  • Grade4
    Moving Averages

  • What Are Moving Averages?
  • Simple Moving Average (SMA) Explained
  • Exponential Moving Average (EMA) Explained
  • Simple vs. Exponential Moving Averages
  • How to Use Moving Averages to Find the Trend
  • How to Use Moving Average Crossovers to Enter Trades
  • How to Use Moving Averages as Dynamic Support and Resistance Levels
  • Summary: Using Moving Averages
  • Grade5
    Popular Chart Indicators

  • How to Use Bollinger Bands
  • How to Use the MACD Indicator
  • How to Use Parabolic SAR
  • How to Use Stochastic
  • How to Use RSI (Relative Strength Index)
  • How to Use ADX (Average Directional Index)
  • Ichimoku Kinko Hyo
  • Trading with Multiple Chart Indicators
  • What is the Best Technical Indicator in Forex?
  • Summary: Popular Chart Indicators
  • Middle School
    0%

    >

    Middle School

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • Grade6
    Oscillators and Momentum Indicators

  • Leading vs. Lagging Indicators
  • How to Use Oscillators to Warn You of the End of a Trend
  • How to Use Momentum Indicators to Confirm a Trend
  • Summary: Leading and Lagging Indicators
  • Grade7
    Important Chart Patterns

  • Chart Patterns Schmatterns
  • How to Trade Double Tops and Double Bottoms
  • How to Trade the Head and Shoulders Pattern
  • How to Trade Wedge Chart Patterns
  • How to Use Rectangle Chart Patterns to Trade Breakouts
  • How to Trade Bearish and Bullish Pennants
  • How to Trade Triangle Chart Patterns
  • Know the 3 Main Groups of Chart Patterns
  • Forex Chart Patterns Cheat Sheet
  • Grade8
    Pivot Points

  • Forex Pivot Points
  • How to Calculate Pivot Points
  • How to use Pivot Points for Range Trading
  • How to use Pivot Points to Trade Breakouts
  • How to Use Pivot Points to Measure Market Sentiment
  • Know the 3 Other Types of Pivot Points
  • Summary: Pivot Points
  • Summer School
    0%

    >

    Summer School

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • Elliott Wave Theory

  • Elliott Wave Theory
  • Impulse Waves
  • Corrective Waves
  • Elliott Waves Within an Elliott Wave
  • 3 Cardinal Rules of the Elliott Wave Theory
  • How to Trade Forex Using Elliott Waves
  • Summary: Elliott Wave Theory
  • Harmonic Price Patterns

  • Harmonic Price Patterns in the Forex Market
  • The ABCD and the Three-Drive
  • Trading The Gartley Pattern
  • 3 Steps in Trading Harmonic Price Patterns
  • Summary: Harmonic Price Patterns
  • High School
    0%

    >

    High School

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • Grade9
    Trading Divergences

  • Trading Divergences
  • Regular Divergence
  • Hidden Divergence
  • How To Trade Divergences
  • How to Avoid Entering Too Early When Trading Divergences
  • 9 Rules for Trading Divergences
  • Divergence Cheat Sheet
  • Summary: Divergences
  • Grade10
    Market Environment

  • Know Your Trading Environment
  • What is a Trending Market?
  • What is a Range-Bound Market?
  • Retracement or Reversal?
  • How to Identify Reversals
  • Protect Yo Self From Reversals
  • Grade11
    Trading Breakouts and Fakeouts

  • How to Trade Breakouts
  • How to Measure Volatility
  • Types of Breakouts
  • How to Trade Breakouts Using Trend Lines, Channels and Triangles
  • How to Measure the Strength of a Breakout
  • Be Careful of Fakeouts
  • Fade the Breakout
  • How to Trade Fakeouts
  • Summary: Trading Breakouts and Fakeouts
  • Grade12
    Fundamental Analysis

  • What is Fundamental Analysis?
  • Why Interest Rates Matter for Forex Traders
  • How Monetary Policy Affects the Forex Market
  • Hawkish and Dovish Central Banks
  • Fundamental Factors That Affect Currency Values
  • Where to Find Forex News and Market Data
  • Market Expectations to News and Their Impact on Currencies
  • Grade13
    Currency Crosses

  • What is a Currency Cross Pair?
  • Why Trade Currency Crosses?
  • Currency Crosses Are Trend-y
  • Trade Interest Rate Differentials
  • Be Careful Trading Obscure Currency Crosses
  • How to Trade Fundamentals With Currency Crosses
  • How to Trade a Synthetic Currency Pair and Why You Probably Shouldn’t
  • Trading the Euro and Yen Crosses
  • How to Use Currency Crosses to Trade the Majors
  • How Cross Currency Pairs Affect Dollar Pairs
  • Summary: Currency Crosses
  • Grade14
    Multiple Time Frame Analysis

  • Trading Multiple Time Frames In Forex
  • What Time Frame Should I Trade?
  • What Time Frame Is Best for Trading?
  • Why You Should Look at Multiple Time Frames When Trading Forex
  • How to Do Multiple Time Frame Analysis to Find Better Entry and Exit Points
  • Trading With Three Time Frames
  • Summary: Multiple Time Frame Analysis
  • Undergraduate
    0%

    >

    Undergraduate

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

    • Freshman Year
    • Sophomore Year
    • Junior Year
    • Senior Year
  • Market Sentiment
  • Forex Market Sentiment
  • Commitment of Traders Report
  • How to Find the COT Report
  • Understanding the COT Report
  • How to Use the COT Report for Trading
  • How to Pick Tops and Bottoms With the COT Report
  • How to Create Your Own COT Trading Indicator
  • How to Interpret the COT Report
  • Summary: Market Sentiment
  • Trading the News
  • News Makes the Forex Market Move
  • Be Careful Trading the News
  • Which News Releases Should I Trade?
  • 2 Ways to Trade the News
  • How to Trade the News With a Directional Bias
  • How to Trade the News Using the Straddle Trade Strategy
  • Summary: Trading the News
  • Carry Trade
  • What is Carry Trade?
  • What is a Currency Carry Trade?
  • Know When Carry Trades Work and When They Don’t
  • Carry Trade Criteria and Risk
  • Summary: Carry Trade
  • The U.S. Dollar Index
  • What is the US Dollar Index?
  • How to Read the US Dollar Index
  • Trade-Weighted Dollar Index
  • How to Use the USDX for Forex Trading
  • The Dollar Smile Theory
  • Intermarket Correlations
  • How Gold Affects AUD/USD and USD/CHF
  • How Oil Affects USD/CAD
  • How Bond Yields Affect Currency Movements
  • How Bond Spreads Between Two Countries Affect Their Exchange Rate
  • How Fixed Income Securities Affect Currency Movements
  • Using Equities to Trade FX
  • Forex and Global Equity Markets
  • The Relationship Between Stocks and Forex
  • How the Stock Market Affects the Forex Market
  • How to Use EUR/JPY as a Leading Indicator for Stocks
  • Intermarket Analysis Cheat Sheet
  • Country Profiles
  • The Forex Trader’s Guide to Major Economies
  • United States of America
  • Euro Zone
  • United Kingdom
  • Japan
  • Canada
  • Australia
  • New Zealand
  • Switzerland
  • China
  • Developing Your Own Trading Plan
  • What is a Trading Plan?
  • Why Do Forex Traders Need A Trading Plan?
  • Why Trading Discipline is the Key to Consistent Profitability
  • How To Find A Trading Style That Suits Your Personality
  • What is Your Motivation to Be a Forex Trader?
  • What Is Your Risk Capital? How Much Money Can You Afford To Lose?
  • How Much Time Can You Dedicate To Forex Trading?
  • Which Kind Of Returns Do You Expect To Make From Forex Trading?
  • What Is Your Daily Pre-Trading Routine?
  • What Forex Trading Software, Hardware, And Other Tools Will You Use?
  • Stick With Your Trading Plan
  • Summary: Developing a Trading Plan
  • Which Type of Trader Are You?
  • Know The Different Types Of Trading Styles
  • Your Most Important Investment As A Forex Trader
  • Scalping
  • Day Trading
  • Swing Trading
  • Position Trading
  • What Type Of Forex Trader Are You?
  • Create Your Own Trading System
  • How To Create A Mechanical Trading System
  • Design Your Trading System in 6 Steps
  • Build Your Trading System in 6 Steps
  • The “So Easy It’s Ridiculous” Trading System
  • Summary: Creating Your Own Mechanical Trading System
  • Keeping a Trading Journal
  • Why You Need A Forex Trading Journal
  • 5 Reasons To Keep A Forex Trading Journal
  • 5 Things You Must Have In Your Trading Journal
  • Potential Trading Area
  • Entry Trigger
  • Position Sizing
  • Trade Management Rules
  • Trade Retrospective
  • Trading Journal Statistics
  • Reviewing Your Trading Journal
  • Keeping A Trading Journal Is Hard But It’s Worth It
  • MeetPips.com: Online Forex Trading Journal
  • Summary: Keeping a Trade Journal
  • How to Use MetaTrader 4
  • Introduction to MetaTrader 4
  • MT4 Basics: How to Set Orders
  • MT4 Basics: How to Install an EA
  • MT4 Basics: How to Use Indicators
  • Risk Management
  • What Is Risk Management?
  • How Much Trading Capital Do You Need For Forex Trading?
  • Drawdown and Maximum Drawdown Explained
  • Never Risk More Than 2% Per Trade
  • Reward-to-Risk Ratio
  • Summary: Risk Management
  • The Number 1 Cause of Death of Forex Traders
  • Ignoring Leverage: Why Most New Forex Traders Fail
  • Leverage and Margin Explained
  • Margin Call Explained
  • Be Careful Trading On Margin
  • See How Leverage Can Quickly Wipe Out Your Account
  • Low Leverage Allows New Forex Traders To Survive
  • How Leverage Affects Transaction Costs
  • Never Underestimate Leverage
  • Position Sizing
  • Position Sizing
  • Calculating Position Sizes
  • Complex Position Sizing
  • Summary: Position Sizing
  • Setting Stop Losses
  • 4 Types Of Stop Losses
  • How To Set A Stop Loss Based On A Percentage Of Your Account
  • How To Set A Stop Loss Based On Support And Resistance From Charts
  • How To Set A Stop Loss Based On Price Volatility
  • How To Set A Stop Loss Based On A Time Limit
  • 4 Big Mistakes Traders Make When Setting Stops
  • 3 Rules To Follow When Using Stop Loss Orders
  • Summary: Setting Stops
  • Scaling In and Out
  • Scaling In And Out Of Positions
  • How To Scale Out Of Positions
  • How To Scale In Positions
  • How To Add To Winning Positions
  • Summary: Scaling In and Out Trades
  • Currency Correlations
  • Currency Correlation Explained
  • How To Read Currency Correlation Tables
  • Are You Doubling Your Risk Without Knowing It?
  • How To Use Currency Correlation In Your Trading
  • Be Careful! Currency Correlations Change!
  • How To Calculate Currency Correlations With Excel
  • Summary: Currency Correlations
  • Graduation
    0%

    >

    Graduation

    You must be signed in in order to save progress

    = Lesson Status
    ?
    Click the dots to track your progress! X

    Each time you revisit while logged into your account, you’ll be able to see exactly what you’ve completed.

  • Forex Trading Scams

  • Forex Managed Accounts
  • Forex Scams
  • Forex Robots
  • Forex Signals
  • Forex Broker Scams
  • U.S. Regulatory Agencies
  • Foreign Regulatory Agencies
  • How To Protect Yourself From Forex Scams
  • Binary Options 101

  • What Are Options?
  • What Are Binary Options?
  • How To Make Money Trading Binary Options
  • 3 Types Of Binary Options
  • Market Analysis For Binary Options
  • Are Binary Options Regulated?
  • Binary Options Vs. Forex
  • Personality Quizzes

  • Quiz: Which Trading Style Is Best For You?
  • Quiz: Which Currencies Should You Trade?
  • Quiz: What Is Your Level of Trading Experience?
  • Quiz: Should You Be A Discretionary or Mechanical Trader? Or Both?
  • Quiz: What Kind Of Mechanical System Suits Your Personality?
  • Quiz: What Is Your Attitude Towards Risk?
  • Quiz: What Kind Of Stop Suits Your Trading Style?
  • Graduation Speech

  • Congratulations! You Made It!
  • Focus on the Process. Not on the Profits.
  • Holy Cow! There’s No Holy Grail!
  • Be Patient. Stay Disciplined.
  • Love The Forex Game
  • School’s Over! Now What?
  • Trading Divergences

    What if there was a low risk way to sell near the top or buy near the bottom of a trend?

    What if you were already in a long position and you could know ahead of time the perfect place to exit instead of watching your unrealized gains, a.k.a your potential Aston Martin down payment, vanish before your eyes because your trade reverses direction?

    What if you believe a currency pair will continue to fall but would like to short at a better price or a less risky entry?

    Well guess what? There is a way! It’s called divergence trading.

    In a nutshell, divergence can be seen by comparing price action and the movement of an indicator. It doesn’t really matter what indicator you use. You can use RSI, MACD, the stochastic, CCI, etc.

    The great thing about divergences is that you can use them as a leading indicator, and after some practice it’s not too difficult to spot.

    When traded properly, you can be consistently profitable with divergences. The best thing about divergences is that you’re usually buying near the bottom or selling near the top. This makes the risk on your trades are very small relative to your potential reward.

    Cha-ching!

    Trading Divergences

    Just think “higher highs” and “lower lows”.

    Price and momentum normally move hand in hand like Hansel and Gretel, Ryu and Ken, Batman and Robin, Jay Z and Beyonce, Serena and Venus Williams, salt and pepper…You get the point.

    If price is making higher highs, the oscillator should also be making higher highs. If price is making lower lows, the oscillator should also be making lower lows.

    If they are NOT, that means price and the oscillator are diverging from each other. And that’s why it’s called “divergence.”

    Divergence trading is an awesome tool to have in your toolbox because divergences signal to you that something fishy is going on and that you should pay closer attention.

    Using divergence trading can be useful in spotting a weakening trend or reversal in momentum. Sometimes you can even use it as a signal for a trend to continue!

    There are TWO types of divergence:

  • Regular
  • Hidden
  • In this grade, we will teach you how to spot these divergences and how to trade them. We’ll even have a sweet surprise for you at the end.

    Previous Lesson
    Mark Lesson Complete

    Next Lesson

    Save your progress by signing in and marking the lesson complete!

  • Trading Divergences
  • Regular Divergence
  • Hidden Divergence
  • How To Trade Divergences
  • How to Avoid Entering Too Early When Trading Divergences
  • 9 Rules for Trading Divergences
  • Divergence Cheat Sheet
  • Summary: Divergences
    • School Sponsors

    BabyPips.com

    Learn Forex

    Forex Tools

    COMPANY

    WEBSITE

    Copyright © 2005-2015 BabyPips.com LLC. All rights reserved.

    "Always listen to the experts. They’ll tell you what can’t be done and why. Then do it."
    Robert Heinlein

    Trading Divergences in Forex – BabyPips.com

    Laisser un commentaire