How Do I Trade Hidden Bullish & Hidden Bearish Divergence Setup
Hidden divergence setup is used as a possible sign for a trend continuation after the market price has finished retracing. It is a trading signal that the original BTCUSD Crypto Currency market trend is resuming. This is the best divergence setup to trade because its signal is in the same direction as that of the continuing price trend.
Hidden Bullish BTCUSD Divergence
This hidden bullish divergence setup happens when market price is making a higher low (HL), but the indicator is showing a lower low (LL). To remember easily think of them as W shapes on the market price charts.
Hidden bullish divergence signal forms when there is a price retracement in an upward Bitcoin price trend.
The example below shows this hidden bullish divergence setup - from the screenshot the price made a higher low (HL) but the indicator made a lower low (LL), this highlights that there was a hidden divergence signal between the BTCUSD price and the indicator. This hidden divergence signal portrays that soon the market upwards trend is going to resume. In other terms it highlights this was just a retracement in an upwards trend.
Hidden Bullish Divergence Trading Signal - BTCUSD Chart
This hidden bullish divergence signal confirms that the retracement move is complete and indicates under-lying strength of an upward trend.
Hidden Bearish Bitcoin Trade Divergence
Hidden bearish divergence setup occurs when price is making a lower high (LH), but the trading indicator is showing a higher high (HH). To remember them easily think of them as M shapes on price charts.
Hidden bearish divergence set-up forms when there's a retracement in a downwards trend.
The example below shows the hidden bearish divergence setup - from this example the Bitcoin price made a lower high (LH) but the indicator made a higher high (HH), this highlights that there was a divergence pattern between the Bitcoin Crypto Currency price and the indicator. This highlights that soon the market downwards trend is going to resume. In other terms it highlights this was just a retracement in a downwards trend.
Hidden Bearish Divergence Setup Signal - BTCUSD Chart
This hidden bearish divergence set-up confirms that a price retracement move is exhausted and indicates strength of a downwards trend. Other popular technical indicators used are CCI technical indicator, Stochastic Oscillator Technical Indicator, MACD and RSI indicators. RSI and MACD are the best indicators to use.
NB: Hidden divergence setup is the best type of divergence signal to trade because it gives a signal that is in the same direction with the current market price trend, thus the set-up has a high risk: reward ratio - because it provides for the best possible entry for opening a trade.
However, one should combine this setup with another indicator like the stochastic oscillator or MA cross over method and buy when the trading indicator is showing the BTCUSD Crypto Currency price is oversold and price has left this region, and sell when the indicator is showing Bitcoin price is over-bought and the market price has left this region.
Combining Hidden Divergence Setup with Moving Average Crossover Strategy
A good indicator to combine these hidden divergence set ups is the moving average indicator using the MA cross over trading method. This will create a good strategy for generating signals and confirming these signals before trading them.
MA Crossover Technique - Bitcoin Strategies
In this strategy, once the divergence signal is given, a trader will then wait for the moving average cross-over method to give a buy/sell signal in same direction:
- If there is a bullish divergence setup between the price and technical indicator, wait for the MA crossover method to give an upward cross-over signal before opening a buy position.
- While for a bearish divergence pattern wait for the MA crossover method to give a downward bearish cross over signal before opening a sell trade position.
By combining this hidden divergence setup with other indicators this way, a trader will avoid whipsaw fakeouts when it comes to trading BTCUSD cryptocurrency using this divergence setup.
Combining Hidden Divergence Trading Signal with Fibo Retracement Levels
For this example we will use an upward market trend. We shall use the MACD.
Because the hidden divergence setup show that the current price move is just a retracement in an upwards trend we can combine the divergence signal with the most popular retracement tool that is the Fib retracement levels.
The example below highlights that when this hidden divergence pattern formed on the BTCUSD price chart, the price had just hit 38.2% Fibonacci retracement level. When price tested this Fib retracement level - this would have been a good level to open a buy order.
Combining Hidden Divergence Trading Signal with Fibonacci Retracement Zones
Combining Hidden Divergence Setup Signal with Fib Expansion Levels
In the example above once the buy trade was opened, one would then need to calculate where to place their take profit order for this trade. To do this a btc/usd trader would need to use the Fib Expansion Levels.
The Fib extension levels were drawn on the price chart as illustrated below.
Combining Hidden Divergence Trading Signal with Fibo Extension Areas
For this example there were three take profit order areas:
- Fibonacci Expansion Level 61.8 %
- Fibonacci Expansion Level 100.0 %
- Fibonacci Expansion Level 161.8 %
Using this hidden divergence strategy combined with Fib Retracement and Fibonacci Expansion tools would have provided a good strategy with a good amount of profit set using these Fibonacci expansion levels take profit areas.
Study More Lessons & Courses:
- How Can You Trade a BTC/USD Trading Price Breakout Pattern?
- How to Read a New Bitcoin Order in MT5 BTC USD iPhone Trading App
- Bitcoin Candle Meanings
- Gann Swing Oscillator BTC USD Technical Indicator Analysis in Bitcoin
- MT4 for Crypto Trading Software
- Hidden Bullish Trade Divergence in Bitcoin Trading
- How Can You Analyze Market Execution BTCUSD Order?
