USDCAD-convergence-divergence-how to trade it(educational)
Hello, today i wan to share with the community this trading system called "convergence-divergence".
I use it very often because it gives a Risk/Reward ratio at least 1:2 and is simple, we use just price action and an oscillator as confirmation.
Price always moves from convergence to divergence. Most of us uses divergence but the combination of convergence and divergence is also powerful.
The USDCAD now is a good opportunity to apply this system. Especially now because its tricky to find an entry point (according to my long term analysis this pair reached a top).
The systems as follows:
1) We find a clear uptrend on price action, a series of HH, HL. We can use a trendline also as a visual tool.
2) Price breaks the uptrend and forms the first Lower Low.
3) We can use an oscillator for confirmation (MACD, stochastics, AO). We mark this level because price usually reaches it and will be the First Target.
After that we switch to a lower timeframe (in this case H4)
We identify a divergence is already in play and confirm it on oscillator.
The confirmation is the first red candle, this would be our first entry.
We find TWO additional levels of S/R, not too far and not too close.
This will be our "extra" entries just in case price reaches that levels.
SL above last level of S/R, the third one.
First target D1 level of convergence.
As you can see this system gives a very good R/R ratio because price usually reaches the D1 level of convergence and often exceedes it.
Advanced management recommended for advanced users: not to use SL to avoid beeing spiked out (i dont use it)
This is a good opportunity to test this system real-time on USDCAD.
Best regards.
I use it very often because it gives a Risk/Reward ratio at least 1:2 and is simple, we use just price action and an oscillator as confirmation.
Price always moves from convergence to divergence. Most of us uses divergence but the combination of convergence and divergence is also powerful.
The USDCAD now is a good opportunity to apply this system. Especially now because its tricky to find an entry point (according to my long term analysis this pair reached a top).
The systems as follows:
1) We find a clear uptrend on price action, a series of HH, HL. We can use a trendline also as a visual tool.
2) Price breaks the uptrend and forms the first Lower Low.
3) We can use an oscillator for confirmation (MACD, stochastics, AO). We mark this level because price usually reaches it and will be the First Target.
After that we switch to a lower timeframe (in this case H4)
We identify a divergence is already in play and confirm it on oscillator.
The confirmation is the first red candle, this would be our first entry.
We find TWO additional levels of S/R, not too far and not too close.
This will be our "extra" entries just in case price reaches that levels.
SL above last level of S/R, the third one.
First target D1 level of convergence.
As you can see this system gives a very good R/R ratio because price usually reaches the D1 level of convergence and often exceedes it.
Advanced management recommended for advanced users: not to use SL to avoid beeing spiked out (i dont use it)
This is a good opportunity to test this system real-time on USDCAD.
Best regards.
