#378: How useful is Divergence?

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How useful is Divergence? Podcast: #378: How useful is Divergence? In this video: 00:25 – Most indicators do not work 00:52 – Trader who joined in 2012 appreciates how good Divergence can be 01:45 – How I use Divergence 02:21 – The 2 types of Divergence 03:05 – My favourite type of Divergence 04:48 – What are we looking for? Divergence. Is it really a useful tool as a Forex Trader or is it a gimmick? Let's talk about that more right now. Hi, Forex traders, Andrew Mitchem here at the Forex Trading Coach with video and podcast number 378. Most indicators do not work Now I want to talk about a really, really special type of indicator. Now as you probably know, I'm not a fan of almost all indicators. I use horizontal levels, but I'm not a fan of different moving averages and things like that. And all the indicators that the Forex brokers constantly throw at you with most platforms that you can get, there's hundreds and hundreds of different indicators that you can find. Trader who joined in 2012 appreciates how good Divergence can be And I want to tell you a story about a client of mine, who back in 2012 joined me. And he's done extremely well from his Forex trading, but he said to me, the other day we had a chat and he said, "Look, Andrew, I just wasn't aware of how good divergence was when you mix it in with all the other things that I'm looking at and I teach as part of my course in my trading strategy." And he said, "I understood certain things about price action and pivot points and candle patterns, but I just didn't appreciate," and it took him quite a while to appreciate. It was only when he saw lots of examples and put it into practise. He didn't appreciate how good divergence can be if you use it the way that I use it. And if you use it correctly. So with that in mind, when he added that to his trading, his trading just increased another level again. How I use Divergence Now I don't use divergence just simply as there's a positive divergent signal, therefore I'm taking a bite. Don't do that at all. I'm using it to back up what I see with my price action trading and my candle stick analysis and my strength and weakness and bouncing off brand numbers and all that type of thing that I look for anyway. But if I get divergence at the same time or just a little bit before my candle pattern, then that gives me an added boost, an added bonus to say, yes, this is a high quality trade. The 2 types of Divergence Now with divergence, what are we looking at? Well, for me, there's two different types of divergence. There's regular divergence, and that's indicating to me a reversal. So we have an uptrend, we get regular negative divergence, and then we're likely to get a downtrend, a reversal. Likewise, we're in a downtrend already, we get regular positive divergence, the trend generally turns around and moves up. Now, as you'd know from previous videos and podcasts, I like reversal traits, but they're slightly higher risk. You know, you are trading against the main direction at the time. So you need to have a very strong pattern, very strong setup in order to justify taking a trend reversal. My favourite type of Divergence But my favourite type of divergence is, and there's a lesser known type of divergence, it's called hidden divergence. And that hidden divergence to me is when the price action is at a certain part of the chart. And when I see that happening, it's a trend continuation pattern. And that to me is a highly strong, high probability, high quality trade setup, because it means I'm trading with the trend, but after a retracement. So in other words, if I see a hidden positive divergence, I'm seeing an uptrend and then a pullback. And then I'm seeing my candle pattern all in a certain part of the chart again, which I trade and I teach, all happening for a reason with the hidden positive divergence. That gives me the confidence to take the bullish trade,