Learn Forex – Divergences Illustrated
Learn Forex (FXpath.com) – Last month, an article describing the different types of price-oscillator divergences that can be found in the forex market (or in any other financial market) was posted here (http://fxpath.com/2010/05/31/forextradingwithdivergences/). That article garnered significant interest from the forex trading community. But what was missing were illustrations of these different types of divergences that would have made them much easier to grasp and understand. Here are the chart illustrations along with some brief explanations:—————–
Bearish Regular Divergence – price makes a higher high while the oscillator makes a lower high. This is a warning or indication of a potential impending bearish reversal after an uptrend.
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Bullish Regular Divergence – price makes a lower low while the oscillator makes a higher low. This is a warning or indication of a potential impending bullish reversal after a downtrend.
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Bearish Hidden Divergence – price makes a lower high while the oscillator makes a higher high. This is a warning or indication of a potential downtrend continuation.
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Bullish Hidden Divergence – price makes a higher low while the oscillator makes a lower low. This is a warning or indication of a potential uptrend continuation.
James Chen, CTA, CMT (bio)
- Click here for my book, Essentials of Foreign Exchange Trading (Wiley).
- Click here for my book, Essentials of Technical Analysis for Financial Markets (Wiley).
- Click here for my video DVD set, High-Probability Trend Following in the Forex Market (FXstreet).
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[...] James Chen explains divergences with some nice illustrations. [...]