I recently encountered a really good TA technique called Hidden Divergence.
You probably already know about the RSI Divergence.
If you don’t know what it is, I have written an article about it. It’s one of the best way to detect the trend change.
Today, I would like to share the idea of Hidden Divergence, which tells you the trend keeps going instead of changing.
It is useful and really works.
Tradingview setup for Hidden Divergence
You will need following chart indicators.
I use tradingview.
It’s free so please make an account and test it along with my description.
Indicators you need
Setup for Stochastic
This is the default view of Stochastic on Tradingview.
Usually people find the possible trend change when those two lines crosses but we aren’t looking for that for this setup.
Double click the line and open the config view.
First, set the K to 5.
Then uncheck D and save.
Now it should look like this.
Now you are ready to use this Hidden Divergence technique!
How to find Hidden Divergence
With Fractal and Stochastic, now it should look like this.
When price goes up but Stochastic goes down, it’s the Hidden Bull Divergence
So let’s put some lines on the chart above.
You see, the price is going up between fractals but Stochastic is going down.
Hidden Divergence indicates the trend will keep going
As you see in the chart, the price keeps going up after the second red fractal.
Stochastic shows it’s going down but the price is ignoring it. It means there is still a strong momentum for the same trend.
Let’s see some examples.
As you see, it usually goes up after that.
It’s really simple. Don’t you think?
I have made some profit using this.
I usually use this on a higher timeframe like 4+ hours.
It should work with lower timeframes but it’s better to capture the bigger trends.
Hidden Divergence + RSI Divergence = Success
When you use both Hidden Divergence and RSI Divergence, you can see where the trend is going much easily.
I really recommend this combination!
Let’s find Hidden Divergence.
Thank you for reading!