Trading divergences

There is another great way to use my favorite stochastic oscillator. There are 4 types of divergences to trade using stochastic.

First 2 types are called regular divergences and they assume trend reversal.
In bullish way the chart should make new lower lows and oscillator should make higher lows.
In bearish wat the chart should make new higher highs and oscilllator should make lower highs.



This is an example of bearish regular divergence on Gbp/Usd. Using orange line I'm showing the divergence and with circle I've marked the possible profit.

Second 2 types of divergences are a little different. They are called "hidden divergences" and they confirm the trend continuation.

Hidden bullish divergence assumes that the rate makes higher lows and the oscillator makes lower lows.

Hidden bearish divergence assumes that the rate makes lower highs and the oscillator makes higher highs.



In this hidden bullish divergence I've marked with circles the possible entry and exit to make a profit trade.