The Stochastic Divergence Indicator MT4
One of the most famous technical Indicators for trading foreign exchange (Forex) is Stochastic divergence Indicator MT4. Developed in the 1950s, it is ranked among the set of oldest Technical Indicators. A quality user of Support and Resistance levels, it is known as stochastic. It means referring to the point of one current price in comparison to its range of price per time.
So this is a very vital tool of forex trading seamlessly applicable in the MT4 chart. It does a great deal of assistance in identifying divergences and saving precious time. It is beneficial for traders who can’t watch the market tirelessly. What’s more? Stochastic divergence Indicator for MT4 can send alerts to a user.
Just like many other technical indicators, using Stochastic divergence Indicator MT4 for trading will yield maximum results when combined with a balanced knowledge of forex trading. Never use any technical indicator in seclusion. A well-balanced analysis of the market is crucial for successful trades.
Differences Between Regular And Hidden Divergences
In Forex trading, it is normal to experience divergences as the price moves contrarily to an oscillator attached to the MT4 chart. Just as one can differentiate between bullish and bearish divergences, regular and hidden divergences can as well be differentiated.
In Forex Trading, Regular bullish divergences occur as the price produces lower lows whereas the oscillator makes higher lows. Hence, an ensuing upward move is very likely.
On the other hand, Regular bearish divergences occur as the price produces a higher high. While the oscillator produces a lower high. When this happens, there is a high possibility that the price goes on a downward move.
Hidden bullish divergences occur when the price produces a higher low; meanwhile, the oscillator produces a lower low. Consequently, an upward move is likely to happen.
Figure 1: a Forex chart showing Hidden and Regular divergences
Hidden bearish divergences occur as the price produces a lower high when the oscillator makes a higher high at the same time. Resultantly, a downward move is most favored to happen.
The indicator makes use of the stochastic indicator as an oscillator.
Also, note that Regular divergences are created on the Forex chart with solid lines whereas hidden divergences are made in the form of dotted lines.
The colors also add to the clear differentiation, Stochastic Divergence Indicator MT4 codes bullish divergences with color green while the bearish divergence is coded red color.
Trading Clues With Stochastic Divergence Indicator
As stated earlier, using the Stochastic Divergence Indicator for MT4 to trade Forex shouldn’t be done without combining it with a balanced trading technique. This will go a long way in advancing the profitability of positions in the market as a well-balanced analysis will guide trading decisions.
Hence, don’t be quick to follow every signal produced by the Stochastic divergence Indicator for MT4 as you could have your fingers burnt. Instead, select the finest signals at the most impressive positions. With the most critical position, I mean when compared to other top 10 mt4 indicators and other tools to get a balanced view of the market. This recommended technique will surely you a trader with more winning percentage as well as better winners on the average.
Stop hunt with Stochastic Divergence Indicator
Imagine trying to cross a crowded street with cars driving at top speed. If you intend to cross to the other side alive and well, you wouldn’t close your eyes and run off to the opposite side. Getting hit by a car isn’t a risk you want to take.
This is comparable to using Stochastic divergence Indicator MT4 and the balanced trader view. Don’t take any divergence as a ground to enter the market (crossing the crowded street). Instead, confirm with other tools and information that it is safe to enter. Competent traders know how to use stop hunts. It explains that support and resistance are likely to reverse the direction of movement of price.
This information can be helpful in selecting those divergence signals which are produced after support and resistance were taken out. It means the big banks had hunted the defensive sell stops in the herd.
When such stop hunt is noticed, the divergences created by the Stochastic divergence can be used to plan entry into a well-balanced trading technique. A regular divergence informs you that the price move speed is slowing down. As a result, the slowing down could be an excellent time for “catching the falling knife” by entering based on the divergence and stop hunt.
The following chart displays a buy trade chance in one sell stop (stop hunt) zone. This buy entry signal would’ve been activated when the initial regular bullish divergence stands specified through the indicator:
Figure 2: a Forex chart showing a buy trade chance in one sell stop (stop hunt) zone
The next chart illustrates the same situation, nonetheless, in the opposite path.
The sell entry signal comes on the scene when the initial regular bearish divergence gets activated as a result of the Stochastic divergence Indicator MT4 once the buy stop (stop hunt) zone is taken care of by the activities of the big banks.
Figure 3: a Forex chart showing a buy trade chance in one sell stop (stop hunt) zone
In the outlined two cases above. You can see the massive moves that happened in the direction of the trade that one could take advantage of to obtain a beautiful profit trade.
Last Remarks on Stochastic Divergence Indicator MT4
Stochastic Divergence Indicator MT4 principle is to convert the accumulated history information into a valuable trading signal. It functions as a momentum indicator which makes use of support and resistance levels.
The indicator offers an opportunity to identify various uniqueness and forms in dynamics of the price. It is something that the ordinary eye cannot see. Using this provided information and other tools and indicators, traders can figure further movement of price and fine-tune their trade strategy accordingly.
It is very pertinent to note that you should never use The Stochastic divergence Indicator for MT4 as a stand-alone Indicator or technique to trade the Forex market. Hence, always combined it with other trading indicators and tools to increase profitability and reduce errors.
This platform has a lot of tested and proven indicators and other tools. Hence, you could use it to help you succeed in the Forex market. Try your hands on some of them through this link and see how they enhance your profitability and lessen losses.
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