Stochastic Divergence Indicator Bitcoin Trading
Divergence trading is one of bitcoin signals that can be generated when using the divergence indicator stochastic oscillator trading indicator.
Divergence on stochastic indicator is a signal that a rally or retracement is losing steam and is likely to reverse. It means that last buyers or last sellers are pushing btcusd crypto currency price in one way while majority of other traders have stopped trading in that way & are cautious of a bitcoin price correction or pull back.
There are Four types of divergence trade setups that can be traded using this divergence technical indicator.
Example 1: BTCUSD Classic Bullish Divergence Setup
A Bullish Divergence in the stochastic indicator & the bitcoin price is followed by a rise in bitcoin price.
stochastic divergence trading indicator
When the bitcoin price is making new lows the stochastic divergence indicator is not moving past its previous lows it is an indication that the down bitcoin trend is about to reverse & a bullish rally is likely to occur.
In the cryptocurrency above example the bitcoin price set a new low but it was not coupled with a new low in the measure of Stochastic, when bitcoin price formed a new low then the trading indicator should have followed suit, but the stochastic did not thence the divergence set-up.
This divergence setup is even stronger because there is combination of a divergence & then followed by a rise above the 20% level. This combines the Overbought and Over-sold levels.
Example 2: Bitcoin Crypto Currency Classic Bearish Divergence
A Bearish Divergence in stochastic indicator and the btcusd crypto currency price is followed by a drop in btcusd crypto currency price.
stochastic divergence indicator
When bitcoin price is making new highs but the stochastic divergence indicator is not moving beyond its previous high it is an indication the up bitcoin trend will reverse & that a bearish divergence will follow.
This trade set-up is interpreted to be even stronger because there's a combination of a divergence with a dip below overbought 80 level.
Example 3: BTCUSD Hidden Bullish Divergence
This stochastic divergence indicator setup signifies a retracement in an upward trend. This is the best type of divergence to trade, because you are not trading a btcusd crypto currency price btcusd crypto currency trend reversal, but you are trading within the direction of the BTCUSD Crypto Currency market trend.
stochastic divergence trading indicator
Even though, the stochastic oscillator stochastic divergence indicator made a lower low the bitcoin price low was higher than the previous low (higher low: HL). This means even though bears made a reasonable attempt to push bitcoin price down as indicated by the stochastic divergence indicator, this was not reflected on the btcusd crypto currency price, & the btcusd crypto currency price didn't make a new low. This is the best place to buy bitcoin crypto, since it's even in an upward bitcoin trend there is no need to wait for a confirmation signal, because you're buying in an upward Bitcoin market trend.
Example 4: BTCUSD Hidden Bearish Divergence
This setup signifies a retracement in a downwards trend.
stochastic divergence trading indicator
This is the best type of divergence to trade with this stochastic divergence indicator, because you aren't trading a bitcoin price bitcoin trend reversal, but you are trading within the direction of the market trend. This is the best place to sell btcusd crypto, since it's even in a down bitcoin trend there is no need to wait for a confirmation signal, because you're selling in a downward Bitcoin trend.
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