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1. 4 Types Of Forex Divergences

2. Using divergences to predict price action is an advanced
trading technique, but the bottom line is that these are
used to identify continuations or reversals in trends. In
particular, divergence traders watch the lows and highs
of price along with the lows and highs of the oscillator
they are using. Below are four kinds of divergences in
forex.

3. First is the regular bullish divergence. This takes place
when the currency pair has lower lows but the oscillator
has higher lows. As a reversal indicator, it shows that the
downtrend made by the previous lower lows in price is
about to be reversed and that an uptrend is ready to
take place.

4. The second kind is known as the regular bearish
divergence. The opposite of the bullish divergence, it is
used to signal a reversal in the ongoing uptrend. This
takes place when price makes higher highs but the
oscillator draws lower highs. This indicates that sellers
have gathered enough energy to push the pair out of its
current uptrend.

5. The third kind is known as the hidden bullish divergence.
It is useful in predicting a possible continuation of the
ongoing uptrend. This happens as price makes higher
lows while stochastic draws lower lows, indicating that
buyers have more momentum to push the pair higher.

6. The last kind is known as the hidden bearish divergence.
The opposite of the bullish divergence, it is used to
predict a continuation of the current downtrend. This
happens as price makes lower highs while stochastic has
higher highs, indicating that sellers have enough fuel to
push the pair lower.

7. Take note though that there are several conventions
when it comes to correctly identifying trading
divergences. Some are stricter with their rules for
marking highs and lows, as some want the oscillator to
reach 80 to be called a high or to dip below 20 to be
called a low.

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