If you want a simple method which makes big gains in Forex trading, you need to learn to trade divergence. The concept is simple to understand and its easy to make big profits with it so lets look at divergence trading in more detail.
Divergence is simply price action, measured and compared with a momentum oscillator for example if prices are rising, you would expect for momentum to be rising as well and in strong trends this happens momentum supports the price trend but at the end of the trend, momentum will fall when prices continue to rise and this is the warning that a reversal will probably occur. So what momentum oscillators are there? The most popular are the MACD, the stochastic, the RSI and the ADX – There all simple to understand and give you a visual view of momentum.
Not every divergence of a momentum oscillator from price, gives you a good trading signal so you need to be selective; the best signals tend to be when the oscillator falls from overbought levels, generating a sell signal or rises from oversold levels, generating a buy signal. Always keep in mind, the more overbought or oversold the oscillator is when the divergence occurs, the better the trading signal will be.
When trading divergence, you can use any number of oscillators, personally I never use more than two; if you use to many, you will generate to many false or late signals so keep your system simple and you will increase your odds of success.
Trading divergence in price from momentum is very simple and it can be very profitable. If you restrict yourself to trading the best signals, you can soon be making huge profits in 30 minutes a day and generating yourself a great second income – so make trading divergence part of your essential Forex education.
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