The Long Divergence forex trading strategy is created to allow currency traders trade positive and negative price divergences in a profitable manner.
Learn below how to buy and sell FX pairs with this strategy:
Chart Setup
MetaTrader4 Indicators: FX5_Divergence_V2.1.ex4 (default setting), GMMA_Long.ex4 (default setting), FRAMA.ex4 (default setting)
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day
Recommended Trading Sessions: Any
Currency Pairs: Any pair
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Buy Trade Example
Fig. 1.0
Strategy
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets displayed:
- If a green upward pointing arrow of the FX5_Divergence_V2.1.ex4 custom indicator pops up within its indicator window as shown on Fig. 1.0, price is said to be pushed higher i.e. a signal to buy the specified currency pair.
- If the blue lines of the GMMA_Long.ex4 custom indicator intersects the red line of the FRAMA custom indicator bottom up with price trading somewhat above the lines, it is pointing to bullish price pressures, hence a trigger to buy the asset of focus.
Stop Loss for Buy Entry: Place stop loss 1 pip below trading support.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes precedence:
- If the red downward pointing arrow of the FX5_Divergence_V2.1.ex4 custom indicator is displayed within the indicator window while a buy signal is on, it is a sign that sellers are exiting their positions, hence an exit or take profit will suffice.
- If the blue lines of the GMMA_Long.ex4 custom indicator crosses the red line of the FRAMA custom indicator top downward as seen on Fig. 1.0, an exit or take profit is highly advised.
Sell Entry Rules
Initiate a sell entry if the following holds true:
- If a red downward pointing arrow of the FX5_Divergence_V2.1 custom indicator pops up within its indicator window as depicted on Fig. 1.1, price is said to be taken lower i.e. a signal to sell the designated forex pair.
- If the blue lines of the GMMA_Long.ex4 custom indicator intersects the red line of the FRAMA custom indicator top downward with price trading somewhat below, it is signal indicating weaning bulls power, hence a trigger to sell the asset of focus.
Stop Loss for Sell Entry: Place stop loss 1 pip above trading resistance.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following holds sway:
- If the green upward pointing arrow of the FX5_Divergence_V2.1.ex4 custom indicator is displayed within the indicator window while a sell signal is on, it is a sign of depleting buy orders in the market, hence an exit or take profit will do.
- If the blue lines of the GMMA_Long.ex4 custom indicator crosses the red line of the FRAMA custom indicator bottom up as shown on Fig. 1.1, an exit or take profit is highly recommended.
Sell Trade Example
Fig. 1.1
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About The Trading Indicators
GMMA_Long.ex4 indicator is a variant of the Guppy Multiple Moving Averages (GMMA) and is deployed in spotting changing trend, via a method that combines two groups of moving averages with varying time periods.
The Fractal Adaptive Moving Average abbreviated as FRAMA, is a technical tool for MetaTrader 4 that was designed by John F Ehlers.
The FRAMA is a type of Adaptive Moving Average that deploys fractal geometry to dynamically fine-tune its smoothing period to fit the altering price action over a given time.
The FX5_Divergence_V2.1.ex4 is a powerful divergence tool deployed in spotting price reversal points from support and resistance zones.
It normally issues a relatively early signal compared to those given by moving average indicators.