It is important to note that Forex extended divergence is one of the varieties of trend divergence in its classical sense. It can be observed when the market intends to slow down, but instead of changing its direction, it continues its movement in the same direction that it was before. If there is an extended bearish divergence on the chart, it can only mean one thing; prices will continue to go down, so you need to look for a selling opportunity.

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To determine the extended bearish divergence, the trader should pay attention to the peaks highs not only on the chart but also on the indicator. Typically, this kind of divergence is seen along the tops during a big move. The market draws a double top, but the second price peak may be slightly higher or lower than the previous value.

Even if the top levels are the same, the indicator will show a lower second high. The indicator will not draw the double top that is seen on the price chart.

You can solve this problem differently. Suppose the price chart draws a double bottom or top, and the indicator does not repeat the formation of patterns like the market but shows a mismatch. In that case, this should be regarded as the formation of an extended bearish or bullish divergence.

If the chart shows an extended bullish divergence, you need to look for a buying opportunity as prices go up. To recognize an extended bullish divergence in the terminal, it is necessary, first of all, to pay attention to the lower part or lows of not only the price but also the basement indicator. Usually, during an extended bullish divergence, quotes draw a double bottom. Although the lows on the chart will be displayed at approximately the same level, the indicator will show a slightly different picture; the second low will be significantly higher than the first.

If this condition is met, it means that we are dealing with an extended bullish divergence in Forex, and the trader should look for profitable moments to buy. If you see an extended divergence on the chart, then take the confirmation from any other indicator.

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In Forex, hidden Forex divergence informs about the continuation of the trend. However, it is rather difficult to recognize it in a trading terminal. Hidden Forex divergence gives a clear signal to open a buy or sell position. If there is a hidden bearish divergence in the market, one can expect that the price chart will continue its downward movement.

When there is a hidden bullish divergence on the chart, then the price will rise. To see the hidden bearish divergence in Forex, you need to identify the peaks of candles or highs of the price, as well as the indicator. The MACD indicator can be used to identify hidden divergence. This scenario emerges only when the price moves down. If the indicator shows a divergence at this moment, then a downward movement can be expected in the future. To detect hidden bullish divergence, you need to pay attention to the lows of the chart, as well as the indicator.

This kind of divergence occurs when the market is upward, drawing high lows, and the indicator reading lower. Most traders see divergence on the chart and simply enter the trade without thinking for another moment. The need is to filter the false signals and find a high probability trade setup. Hence, do not enter the trade impulsively rather wait for a brief pullback and then enter. Also, you can avoid a bad trade by following the candles. For example, if you see a bullish divergence, then wait for a bullish candle to appear and then enter. Do not enter a trade if there is a long wick on the upside of the candle.

You can find divergence with any oscillator indicator. However, the results vary with the currency pairs and the chosen indicator. Among all, we have shortlisted the top three oscillator indicators that can be very helpful in your trading. The MACD indicator can be very beneficial for finding the divergence and spotting early trend reversal in currencies.

You can use the default settings of the indicator on any timeframe. However, it is better to use 1-hour timeframe. You can use take profit and stop-loss at fixed 20 pips difference or you can use the support and resistance levels as well. The CCI indicator is another good choice to determine the divergence. It can be applied on any timeframe with default settings.

However, it is recommended to use minute, minute, and 1-hour timeframes. You can use the oversold and overbought conditions to exit the trades. Stochastic is a widely used indicator for divergence. The recommended timeframe is 1-hour while the indicator can be used to exit the trades based on overbought and oversold conditions.

How are divergences formed?

Divergence is a means to find the early trend reversal signal. There can be three types of divergence, i. You should use any confirmatory signal to add further probability of success to your trading. If you want to receive an invitation to our live webinars, trading ideas, trading strategy, and high-quality forex articles, sign up for our Newsletter. Subscribe to our youtube channel.

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Lost your password? Please enter your email address. The price cannot as easily push lower and each trendwave is weaker. The MACD shows multiple divergences, but just going with the first divergence alone would be a losing system. The patient trader would wait for multiple divergences to form. Also, it is advisable to wait until the price makes a new higher high and completely signals a trend shift. The screenshot below shows another example of a double divergence.

At first, we saw a regular single divergence but the price did not reverse and kept on going lower. Then, the MACD confirmed the downtrend once again and posted lower lows green lines — convergence. After the convergence, the trend weakened and the trend waves became shorter. The MACD now shows a double divergence and the market reversed higher. Thus, trading a single divergence on its own does provide less accuracy compared to a double divergence. Of course, sometimes a single divergence will cause a trend reversal already, but waiting for double divergences could increase the trade quality.

The last screenshot shows a double divergence and it is also apparent that the price action is becoming increasingly weaker. The price candes and trend waves leading lower are short and not as strong. At the bottom, the price also printed a pinbar which is generally considered a reversal signal if it occurs in the right context. This article provides insightful information about how to improve signal quality. Of course. We failed on many instances when we found a single divergence and either it worked or, went against our expectations.

My question is should we consider the divergence particularly when there is a sudden Long candle with very long tail to find divergence? Please revert.