Divergence BTCUSD Trading Setups

Divergence is one of the trade set ups used by Bitcoin traders. It involves looking at a cryptocurrency chart & one more indicator. For our examples we shall use the MACD indicator.

To spot this trading setup find two chart points at which bitcoin price makes a new swing high or a new swing low but MACD indicator doesn't, indicating a divergence between bitcoin price & momentum.

To look for divergence we look for two chart points, 2 highs that form an M-shape on the Cryptocurrency chart or two lows that form a WShape on the Bitcoin chart. Then look for the same M-shape or W-Shape on the Bitcoin indicator you use to trade.

Example of a Divergence Trade Setup:

In the cryptocurrency chart below we spot 2 chart points, point A and point B (swing highs). These two points form an M-shape on the bitcoin price chart.

Then using MACD indicator we check highs made by the MACD, these are the highs that are directly below Chart points A and B.

We then draw one line on the Cryptocurrency chart and another line on the MACD indicator.

Drawing Divergence Bitcoin Trading Lines

The chart above shows an example of one of the 4 types of divergences, the one above is known as hidden bearish divergence, one of the best type to trade. Types of divergences are covered in the next lesson.

How to spot divergence

In order to identify Bitcoin diverging trading signal we look for the following:

• HH=Higher High- 2 highs but the last one is higher
• LH= Lower High- 2 highs but the last one is lower
• HL=Higher Low- 2 lows but the last one is higher
• LL= Lower Low- 2 lows but the last one is lower

First let us look at the illustrations of these terms:

M-shapes dealing with Bitcoin price Highs

W Shapes dealing with BTCUSD price lows

Example of M Shapes

Examples of W Shapes

Now that you've learned the divergence terms that are used to explain setup. Let us look at the 2 types of divergences & how to trade these chart setups.

There two types are:

1. Classic Bitcoin Trade Divergence

2. Hidden BTCUSD Trading Divergence

These 2 setups are explained on the following tutorials below