Divergence occurs when the market makes a higher high or lower low, but the oscillator gives the opposite signal. The oscillator indicators that you can use to identify this signal are MACD, Stochastic, RSI, CCI, OBV,... However, in this article, we mainly talk about divergence signals. on MACD.

There are 2 types of divergences that are regular divergences and hidden divergences. In which, divergence is often used for reversal trading, while hidden divergence is used to trade on-trend.

However, these signals have a huge disadvantage in that they have quite a lot of false signals, and most traders have to trade such signals. That means you need to learn to distinguish and focus on trading on quality divergence signals to be able to improve trading results.

The indicator that shares with you will help you determine when the market forms a divergence and automatically plot it on your chart. In order to distinguish which signal is good for you to enter the trade, you need confirmation of other technical factors. Our indicator is called MACD_Divergence.
What is MACD Divergence? 

This is an indicator that automatically draws divergences on the MACD indicator, including normal and hidden divergences. As shown below:


Set parameters for the indicator

Install for indicators, follow the instructions below. The input you install is shown below:


The color you can customize according to your personal taste.

In addition, the indicator already has a section showing divergence signals, so if you open your computer, you do not need to keep track of the chart continuously, but just wait for the notification of divergence to appear. then transact.

Applying to trade

There are many ways to apply divergence signals into trading. But you note, divergence signals are often used for reversal trading, while hidden divergences are used to trade trend continuation.

Do not use independent divergences for trading, because divergences only signal the possibility of the upcoming direction and do not provide an entry point for us. Therefore, to time the market, traders should combine with other trading techniques. Examples are resistance support or signal overbought or oversold.

Example of an often reversal divergence combining support at resistance:


Divergence hide trading when the market has a trend: