{"id":9707,"date":"2022-10-12T20:08:49","date_gmt":"2022-10-12T20:08:49","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9707"},"modified":"2022-10-12T20:08:49","modified_gmt":"2022-10-12T20:08:49","slug":"9-rules-for-trading-divergences","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/12\/9-rules-for-trading-divergences\/","title":{"rendered":"9 Rules for Trading Divergences"},"content":{"rendered":"\n<p><strong>Divergences<\/strong>&nbsp;are used by traders in an attempt to determine if a trend is getting&nbsp;<em>weaker<\/em>, which may lead to a&nbsp;<strong>trend reversal or continuation<\/strong>.<\/p>\n\n\n\n<p>Before you head out there and start looking for potential divergences, here are nine cool rules for trading divergences.<\/p>\n\n\n\n<p>Learn \u2019em, memorize \u2019em (or keep coming back here), apply \u2019em to help you make better trading decisions.<\/p>\n\n\n\n<p>Ignore them and go broke.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">1. Make sure your glasses are clean<\/h2>\n\n\n\n<p>In order for a\u00a0divergence\u00a0to exist, the price must have either formed one of the following:<\/p>\n\n\n\n<ul><li>Higher high than the previous high<\/li><li>Lower low than the previous low<\/li><li>Double Top<\/li><li>Double Bottom<\/li><\/ul>\n\n\n\n<p>Don\u2019t even bother looking at an indicator unless ONE of these four price scenarios has occurred.If not, you ain\u2019t trading a divergence, buddy.<\/p>\n\n\n\n<p>You\u2019re just imagining things. Immediately go see your optometrist and get some new glasses.<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #1: Yes\" title=\"Divergence Trading Rule #1: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule1-yes.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule1-yes.png\" alt=\"There must be extreme highs and lows\" title=\"There must be extreme highs and lows\"\/><\/a><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-down.jpg\" alt=\"Divergence Trading Rule #1: No\" title=\"Divergence Trading Rule #1: No\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule1-no.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule1-no.png\" alt=\"Divergences do not work in ranging markets\" title=\"Divergences do not work in ranging markets\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">2. Draw lines on successive tops and bottoms<\/h2>\n\n\n\n<p>Okay now that you got some action (recent price action that is), look at it. Remember, you\u2019ll only see one of four things:&nbsp;<strong>a higher high, a flat high, a lower low, or a flat low<\/strong>.Now draw a line backward from that high or low to the previous high or low. It HAS to be on successive major tops\/bottom.<\/p>\n\n\n\n<p>If you see any little bumps or dips between the two major highs\/lows, do what you do when your significant other shouts at you \u2013 ignore it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">3. Connect TOPS and BOTTOMS only<\/h2>\n\n\n\n<p>Once you see two swing highs are established, you connect the TOPS.<\/p>\n\n\n\n<p>If two lows are made, you connect the BOTTOMS.<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #3: Yes\" title=\"Divergence Trading Rule #3: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule1-yes.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule1-yes.png\" alt=\"Connect successive tops or bottoms only\" title=\"Connect successive tops or bottoms only\"\/><\/a><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-down.jpg\" alt=\"Divergence Trading Rule #3: No\" title=\"Divergence Trading Rule #3: No\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule3-no.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule3-no.png\" alt=\"Divergences do not work in ranging markets\" title=\"Divergences do not work in ranging markets\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">4. Keep Your Eyes on the Price<\/h2>\n\n\n\n<p>So you\u2019ve connected either two tops or two bottoms with a trend line. Now look at your preferred technical indicator and compare it to price action.<\/p>\n\n\n\n<p>Whichever indicator you use, remember you are comparing its TOPS or BOTTOMS.<\/p>\n\n\n\n<p>Some indicators such as MACD or Stochastic have multiple lines all up on each other like teenagers with raging hormones. Don\u2019t worry about what these kids are doing.<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #4: Yes\" title=\"Divergence Trading Rule #4: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule4.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule4.png\" alt=\"Focus on tops and bottoms\" title=\" Focus on tops and bottoms \"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">5. Be Consistent With Your Swing Highs and Lows<\/h2>\n\n\n\n<p>If you draw a line connecting two highs on price, you MUST draw a line connecting the two highs on the indicator as well. Ditto for lows also.<\/p>\n\n\n\n<p>If you draw a line connecting two lows on price, you MUST draw a line connecting two lows on the indicator. They have to match!<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #5: Yes\" title=\"Divergence Trading Rule #5: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule5-yes.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule5-yes.png\" alt=\" If you draw connecting highs on price, you must do the same on the indicator. \" title=\"If you draw connecting highs on price, you must do the same on the indicator.\"\/><\/a><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-down.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule5-no.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule5-no.png\" alt=\"Price and oscillator highs or low much match!\" title=\" Price and oscillator highs or lows must match!\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">6. Keep Price and Indicator Swings in Vertical Alignment<\/h2>\n\n\n\n<p>The highs or lows you identify on the indicator MUST be the ones that line up VERTICALLY with the price highs or lows.<\/p>\n\n\n\n<p>It\u2019s just like picking out what to wear to the club, You gotta be fly and matchin\u2019 yo!<\/p>\n\n\n\n<p>Maintain&nbsp;<strong>vertical alignment<\/strong>&nbsp;with the PRICE\u2019s swing highs and lows with the INIDCATOR\u2019s swing highs and lows.<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #6: Yes\" title=\"Divergence Trading Rule #6: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule6.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule6.png\" alt=\"Price and oscillator highs must match!\" title=\"Price and oscillator highs must match!\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">7. Watch the Slopes<\/h2>\n\n\n\n<p>Divergence only exists if the SLOPE of the line connecting the indicator tops\/bottoms DIFFERS from the SLOPE of the line connection price tops\/bottoms.<\/p>\n\n\n\n<p>The slope must either be: Ascending (rising) Descending (falling) Flat (flat).<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #7: Yes\" title=\"Divergence Trading Rule #7: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule7.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule7.png\" alt=\"Divergence slopes must differ.\" title=\"Divergence slopes must differ.\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">8. If the ship has sailed, catch the next one.<\/h2>\n\n\n\n<p>If you spot divergence but the price has already reversed and moved in one direction for some time, the divergence should be considered played out.<\/p>\n\n\n\n<p>You missed the boat this time. All you can do now is wait for another swing high\/low to form and start your divergence search over.<\/p>\n\n\n\n<figure class=\"wp-block-image alignleft\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-thumbs-up.jpg\" alt=\"Divergence Trading Rule #8: Yes\" title=\"Divergence Trading Rule #8: Yes\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image alignleft\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule8.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade11-rule8.png\" alt=\"Do not chase a move when trading divergences.\" title=\"Do not chase a move when trading divergences.\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">9. Take a Step Back<\/h2>\n\n\n\n<p>Divergence signals tend to be more accurate on the&nbsp;<strong>longer time frames<\/strong>. You get fewer false signals.<\/p>\n\n\n\n<p>This means fewer trades but if you structure your trade well, then your profit potential can be huge.<\/p>\n\n\n\n<p>Divergences on shorter time frames will occur more frequently but are&nbsp;<strong>less reliable<\/strong>.We advise only look for divergences on<strong>&nbsp;1-hour charts or longer<\/strong>.<\/p>\n\n\n\n<p>Other traders use 15-minute charts or even faster. In those time frames, there\u2019s just too much noise for our taste so we just stay away.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2020\/05\/24200900\/price-noise-360x360.png\" alt=\"Too Much Price Noise\" class=\"wp-image-177994\"\/><\/figure>\n\n\n\n<p>So there you have it!<\/p>\n\n\n\n<p>Nine rules you MUST (should?) follow if you want to seriously consider trading using divergences.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>Follow these rules, and you will dramatically increase the chances of a divergence setup leading to a profitable trade.<\/p>\n\n\n\n<p>Now go scan the charts and see if you can spot some divergences that happened in the past as a great way to begin getting your divergence skills up to par!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Divergences&nbsp;are used by traders in an attempt to determine if a trend is getting&nbsp;weaker, which may lead to a&nbsp;trend reversal or continuation. Before you head out there and start looking for potential divergences, here are nine cool rules for trading divergences. Learn \u2019em, memorize \u2019em (or keep coming back here), apply \u2019em to help you [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[781],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9707"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9707"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9707\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9707"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9707"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9707"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}