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id and we will start the topic in a minutes OK today's video is about divergence.
Some of you maybe already know bout it, but somebody don't.
We will start from.
What is Divergence.
to trade divergence, we can choose one of several indicators from oscillators if we check it here insert > indicators > oscillators there are couple of indicators but in this video I will use stochastic Divergence is a phenomenon when there is a distortion between oscillators and the main chart the main chart visualised on top, and oscillators in the bottom in this case I use stochastic oscillators indicators is lagging (following the chart) after the main chart make a movement, oscillators will follows it's direction when chart make a correction, oscillators will follows to correction when chart moving up, oscillators follows after but there is always occurs a distortion between oscillators and the main chart on their swing highs and lows.
see this illustration the main chart moves up make a high, and then this stochastic follows make high main chart retrace, stoch follows retrace make low and so on up and down but then, there is a distortion here main chart forms Higher High, but the stoch makes Lower High so if we mark it with trendline, there is difference between main chart and oscillator main chart makes higher high and trendline upworth but the stochastic makes Lower High and trendline downworth distortion like this is called “divergence” I also wrote it here Divergence is difference of swing highs and lows between chart and oscillators I said this in many times, that the trend (let say bullish) is formed by swing highs and lows that getting higher these angles on the chart is called swing swing high – swing low the angle getting high makes higher high and then retrace makes higher low (latest low still higher than previous low) this first example is kind of regular divergence regular divergence means that the trend will reverse (reversal signal) this trend is bullish, right? if in the future we find a regular divergence, the forecast is trend will reverse to bearish also works on bearish trend we can see obviously that this is a bearish trend but then there is a divergence right here this swing on the main chart is higher low (not breakout previous low) but stoch makes lower low (this low is lower than previous low) to practice this, you can use vertical line to connect oscillator with main chart this vertical line is for this swing low on the stoch and main chart and this LL on the stoch lined up with HL on the main chart this is also a divergence after bearish, now it turned to bullish after divergence if the trend is bullish, we can find a regular divergence at the swing highs focussed with highs wait untill formed a regular divergence in the future, and we can make entry after that just focussed with swing highs when we find a regular divergence like this main chart makes HH but stoch makes LH so we can sell it entry sell with SL above resistance where is the resistance? we can search it around this HH (last swing divergence) near this swing is places for our entry scroll back the screen to see the history mark it first with horizontal line scroll backward to find the resistance level to place our Stop Loss I will practice later like that also for bearish one divergence was here this is very obvious support.
Here is our Stop Loss we buy on this swing because it was a divergence regular divergence we buy and our stoploss is bellow this previous swing low and then trend reverse with very strong movement but it's just a historical review, different exprerience maybe happen when you practice that was the first : “Regular Divergence” jump to the 2nd type : “Hidden Divergence” the 2nd type is called “Hidden Divergence” if regular divergence is a reversal signal the hidden divergence is trend continuation signal hidden divergence appear among the trend if regular is a sign for a trend will ended (appear at the end of the trend) let say the previous trend is bullish, and then appear regular divergence.
It means those bullish is on the end of time and will turns to bearish soon.
for hidden divergence, it's appear among the trend and it's a sign of trend continuation.
let say the previous trend here is a bearish signed with the swing highs and lows getting low makes lower lows and lower highs if we see here the swings of this trend getting lower and lower makes new lower highs and lower lows but in this stochastic, there is one jutted movement makes higher high this is an imbalance movement between main chart and this stiochastic this is a divergence because this divergence occurs among the trend, it's called hidden divergence if trend is bearish, you can find hidden divergence on it's highs in bearish trend, just focussed with swing highs to find ubnormal conditions like this we can see obviously that this is a bearish, but the stochastic makes jutted swing this is divergence because imbalance between oscillator and main chart now how to entry this is bearish example.
here is the imbalance (divergence area) main chart makes lower high (this swing high lower than previous high) meanwhile the stochastic makes higher high instead.
it's imbalance so we can sell right there with SL above resistance / previous swing high so we sell with SL above this previous high and then it's dropped also like that for bullish trend this is obviously a bullish trend starting from here makes low > high new low wich is a higher low it's higher that previous low and then this is higher high (higher than previous high) retrace again makes new higher low stop here I'll explain this divergence case once it's correction, it makes a higher low a.
price can't breakout this previous low but what happen in stochastic is makes lower low which is this low in stochastic is lower than previous low it's a divergence because this happenned among the trend, so this is a hidden divergence so we can buy if we find this case, with SL bellow support / previous swing low this is the previous low, so our SL is there after we buy and price goes upward so that was the theory about two kinds of divergence 1st : regular divergence, 2nd : hidden divergence so, now let's surf the real chart I'll try to find another divergence cases to make you more understand gimme 5 minutes more this is divergence, guys.
first of all we can mark the angles of chart and oscillator with vertical line like this ok I'll add rectangle to make it clear.
this is swing low the same in stochastic oscillator and main chart is lined up with vertical line for bearish trend, focussed with swing lows to find regular divergence and then the main chart makes new low but the stochastic makes higher low so there is imbalance here this is low right here makes LL ok meanwhile the stochastic happen this here is low, still same with the chart.
here is the different one right here makes higher low so if we pull trendline from swing to swing like this you will see the imbalanceness I'll make it thick trendline on the chart looks like this downworth like that but the stochastic upworth instead this is a divergence, so we can buy and then find where is the support area the support is bellow this swing so our stoploss is around there and good result reached SL about 139 points rewards up to 840's points very good R:R ratio I think there is also hidden divergence here this is an hidden divergence I'll make it short.
no need much examples I might will give you the live trade video Let me mark it first vertical line the first vertical line to make stochastic and main chart lined up and also the 2nd vertical line ok no need to write it to make this fast don't you see the imbalance between stochastic and the main chart? if we use trendline like this the trendline on the main chart : downworth but in the stochastic upworth imbalance situation, so this is an hidden divergence because it's occured among the trend so we can sell it here, with SL above previous swing high and then it's dropped that was the examples you can apply divergence as an additional confirmation it's very good to combined with other strategy please use divergence to additional filter of your strategy that was it for today's video hopefully you got new knowledges after watching this ask me any question on comment section watch my other videos because there are a lot of useful informations I was shared through this channel you can also request me what topic I need to explain next don't forget to claim your rebate, visit GURUFOREX.
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