Groundstoneholdings
Education post 12/100 – How to trade hidden divergence?We covered regular divergences in the previous lesson, now let’s discuss what hidden divergences are.
Divergences not only signal a potential trend reversal; they can also be used as a possible sign for a trend continuation (price continues to move in its current direction).
Always remember, the trend is your friend, so whenever you can get a signal that the trend will continue, then good for you!
Hidden bullish divergence happens when price is making a higher low (HL), but the oscillator is showing a lower low (LL).
Hidden Bullish Divergence
This can be seen when the pair is in a UPTREND.
Once price makes a higher low (HL), look and see if the oscillator does the same.
If it doesn’t and makes a lower low (LL), then we’ve got some hidden divergence in our hands.
Hidden Bearish Divergence
Lastly, we’ve got hidden bearish divergence.
This occurs when price makes a lower high (LH), but the oscillator is making a higher high (HH).
By now you’ve probably guessed that this occurs in a DOWNTREND.
When you see hidden bearish divergence, chances are that the pair will continue to shoot lower and continue the downtrend.
Let’s recap what you’ve learned so far about hidden divergence.
If you’re a trend follower, then you should dedicate some time to spot some hidden divergence.
If you do happen to spot it, it can help you jump in the trend early.
Sounds good, yes?
Keep in mind that regular divergences are possible signals for trend reversals while hidden divergences signal trend continuation.
Regular divergences = signal possible trend reversal
Hidden divergences = signal possible trend continuation
Education post 11/100 – How to trade downside channel pattern?If we take this trend line theory one step further and draw a parallel line at the same angle of the uptrend or downtrend, we will have created a channel.
No, we’re not talking about ESPN, National Geographic Channel or Cartoon Network.
Still, this doesn’t mean that you should walk away like it’s a commercial break- channels can be just as exciting to watch as Game of Thrones or Keeping Up with the Kardashians!
Channels are just another tool in technical analysis which can be used to determine good places to buy or sell.
Both the tops and bottoms of channels represent potential areas of support or resistance.
To create an up (ascending) channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to position where it touches the most recent peak. This should be done at the same time you create the trend line.
To create a down (descending) channel, simply draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley. This should be done at the same time you create the trend line.When prices hit the LOWER trend line, this may be used as a buying area.
When prices hit the UPPER trend line, this may be used as a selling area.
Types of channels
There are three types of channels:
Ascending channel (higher highs and higher lows)
Descending channel (lower highs and lower lows)
Horizontal channel (ranging)
Important things to remember about drawing trend lines:
When constructing a channel, both trend lines must be parallel to each other.
Generally, the bottom of channel is considered a buy zone while the top of channel is considered a sell zone.Like in drawing trend lines, DO NOT EVER force the price to the channels that you draw!
A channel boundary that is sloping at one angle while the corresponding channel boundary is sloping at another is not correct and could lead to bad trades.
