Placing stop loss and take profit in divergence trading

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Other trend indicators can be used for filtering. Any of its signals will be considered stronger than the divergence signal. Step-by-step guide to divergence trading By reviewing the theory and practice of using divergences, we can develop an algorithm of action for trading with this tool: We determine the direction of the trend that appears on the price chart at the moment. We build a trend line. We identify 2 highs/lows to determine if there is divergence. We put the MACD histogram on the price chart and locate the maximums/minimums corresponding to the price chart. Seeing that there is a discrepancy between the price and the indicator, we determine the type and direction of the signal. Now we define the entry point to the market.

In the basic version, I propose to use the close behind the trend line as a signal to enter. In the basic strategy, a stop loss is provided and placed some distance from the highest extreme of the price. In a simpler version, I suggest setting a trading target at a distance of two stops. This strategy is basic. It can be a good guide for beginners. Try it  Peru Mobile Number List yourself . Enter the platform without registration, in a couple of clicks find a divergence and build your personal trading plan. No matter what trading method you use, you should always use stop loss and take profit. A person cannot sit at the screen all day and at the right time only these two tools will save your deposit and help fix the profit. If you trade with divergence signals, in a classic bearish divergence you should place the stop above the last highest high.



When it is bullish below the last, the deepest. LiteFinance: What is Forex Divergence?  Divergence and convergence: theory and practice of application |  Litefinance The example above shows the optimal stop location, marked with a red line. Since the divergence is bearish, it is placed just above the local extreme. In the case of opposite divergence, the stop is set distant from the larger extreme, which is part of the design of the divergence itself. Since trading with these signals involves following the trend, the profit-taking level can be defined by any signal to change the relevant trend. For beginners, I recommend following a simplified scheme and setting profits at a distance of 2x from the entry level to the stop. Forex Divergence Indicators Traders in their practice often rely on the divergence of oscillators. The most popular divergence indicators for mt4 are MACD, RSI , Stochastic and AO.