Abstract：As a trader, bear in your mind that we use divergence as an indicator, not as a signal to enter a trade, and there are too much false signals from the divergences so depending ok divergences only to trade would not be smart.
Remember from our previous lesson, we have clearly explained what Divergences are in trading. Therefore As a trader, bear in your mind that we use divergence as an indicator, not as a signal to enter a trade, and there are too much false signals from the divergences so depending ok divergences only to trade would not be smart. Its not 100% foolproof, but when divergence is used as a setup condition and combined with additional confirmation tools, your trades will have a high probability of winning with relatively low risk. And There are a multiple number of ways to take advantage of those divergences.
One way is to look at trend lines or candlestick patterns to confirm whether a reversal or continuation is in order.
Another way is to make use of momentum tricks by watching out for an actual crossover or waiting for the oscillator to move out of the overbought/oversold region.
You can also try drawing trend lines on the oscillator too.
Using these effective and useful tricks, you can protect yourself against false signals and filter out those thatll be very profitable. On the other side, it is just as dangerous trade against this indicator.
When you are not sure and certain about which direction to trade, hang out on the sidelines. Remember that taking no position is a trading decision in itself and it‘s better to hold on to your hard-earned cash than just relaying on a shaky trade idea to jump. Divergences don’t appear that frequently, but when they do appear, then it will be useful for you to pay attention.
Regular divergencescan assist you collect a big chunk of profit because youre able to get in right when the trend changes.
Hidden divergences can help you ride a trade longer resulting in bigger-than-expected profits by keeping you on the correct side of a trend.
The idea is to train your eye to spot divergences when they appear AND choose the proper divergences to trade. Just because you see a divergence, it doesn‘t necessarily mean you should automatically jump in with a position. Choose your setups and you’ll increase your strange of winning trades.
Understand the Trading Environment
These champions have one thing in common: they not only work their butts off, but they also enjoy what they do.
"Patience is the key to everything," American comic Arnold H. Glasgow once quipped. The chicken is gotten by hatching the egg rather than crushing it."
Ask any Wall Street quant (the highly nerdy math and physics PhDs who build complicated algorithmic trading techniques) why there isn't a "holy grail" indicator, approach, or system that generates revenues on a regular basis.
We've designed the School of WikiFX as simple and enjoyable as possible to help you learn and comprehend the fundamental tools and best practices used by forex traders all over the world, but keep in mind that a tool or strategy is only as good as the person who uses it.