Super Simple Effective Forex Divergence Trading System and Strategy – When traded properly, you can be consistently profitable with divergences. The best thing about divergences is that you’re usually buying near the bottom or selling near the top. This makes the risk on your trades are very small relative to your potential reward.
If price is making higher highs, the oscillator should also be making higher highs. If price is making lower lows, the oscillator should also be making lower lows.
If they are NOT, that means price and the oscillator are diverging from each other. And that’s why it’s called “divergence.”
Divergence trading is an awesome tool to have in your toolbox because divergences signal to you that something fishy is going on and that you should pay closer attention.
Using divergence trading can be useful in spotting a weakening trend or reversal in momentum.
Sometimes you can even use it as a signal for a trend to continue!
Simple Effective Forex Divergence Trading Rules
This Divergence system is a simple system based on divergence of the price with the Widhog RSX nrp and Momentum indicator.
This is a tool that you can use with other trading system for more information on the dynamically of the price,
- Effective Time Frame : 15 min or higher.
- Financial markets : any.
- Widhog RSX RNP Divergence buy arrow
- Momentum line upward above 100 level
- MA blue above MA gold
- Widhog RSX RNP Divergence sell arrow
- Momentum line downward below 100 level
- MA blue below MA gold
Making a Winning Divergence Trade
So how can we best maximize the profit potential of a divergence trade while minimizing its risks?
First of all, although divergence signals may work on all timeframes, longer-term charts (daily and higher) usually provide better signals.
As for entries, once you find a high-probability trading opportunity on an oscillator divergence, you can scale into position using fractionally-sized trades.
This allows you to avoid an overly large commitment if the divergence signal immediately turns out to be false.
If a false signal is indeed the case, stop-losses are always firmly in place – not so tight that you get taken out by minor whipsaws, but also not so loose that the beneficial risk/reward ratio will be skewed.
If the trade becomes favorable, on the other hand, you can continue to scale in until your intended trade size is reached.
If momentum continues beyond that, you should hold the position until momentum slows or anything larger than a normal pullback occurs. At the point that momentum wanes, you then scale out of the position by taking progressive profits on your fractional trades.
If a choppy, directionless market is prolonged, it should prompt you to cut your risk and go hunting for a better divergence trade.