Trading Gold with divergence can offer nice rewards, if you understand the way the divergences play out on the charts. Last night was a great example of how divergence can show an upcoming move in Gold (or any other market for that matter).
Trading Gold with Divergence
The 45 minute Gold chart below highlights the clues — let’s face it traders are price detectives. First, there is trend divergence followed by hidden divergence on the highs. This tells us that price should retest the low (and more than likely exceed it).
Here is where it gets really interesting — price doesn’t exceed the previous low. It fails to do so and instead makes a double bottom between the two higher lows. This is an indication that the “trend” is finished. This occurred at 8:00 pm New York time on 12/15/16 and indicated that the market would go up during the overnight session.
The vertical line on the chart below shows the 8:00 pm bar on the 12 minute chart. Notice the white congestion dots — I tell traders all the time, when the white dots form, price will test the Average True Range Stop (blue plus sign). In this example, it closes above the white dots first and then………………it tests the Average True Range Stop. This formed hidden divergence on the TradersHelpDesk Stochastics, which provided an absolutely low risk entry, on diverging volume no less (measured with the TradersHelpDesk Directional Volume indicator). Then a few bars later, price makes a low on huge selling volume — this is considered to be hidden divergence in volume but is one of the hardest to pick up. The TradersHelpDesk Stochastics picks it up earlier and is easier to read.
Trading Gold with divergence results in a seven dollar move on Gold, which any trader would be happy with. Earlier in the week with had almost an identical setup on Gold but the result was only a three dollar move. The difference was that this move was identified on the higher timeframe so there was a larger move.
The signals are available for a monthly subscription of $99. They are generated from the TradersHelpDesk Trend ATR indicator, which is currently on sale this week only for $300. Or you can choose any 3 indicators for only $795 (ends this week). The indicators for trading Gold with divergence are currently available for TradeStation, NinjaTrader 7 and Multicharts (with the exception of the TradersHelpDesk Stochastic which is only available for TradeStation and Multicharts at the moment).