A Complete Trading Guide - How Trade Hidden Divergence and Ride The Trend

Hey guys, how are you? Vladimir here from Home Trader Club, and in this video I want to show you how you can use a bullish or bearish hidden divergence in a very simple method in trend trading— how you can actually join the trend thanks to hidden divergence. To do that, we will first of all define what is a hidden divergence And we will talk about the few very important nuances, a few very important things to pay attention to when it comes to hidden divergence trading. Okay, so let's go to the charts. Let's begin. Before we start, I want to take the opportunity to thank 8K Broker for supporting our community to enjoy all the amazing offers we have with 8K Broker, including the access to Home Trader Club up to 1 full trading year, private mentoring sessions, the live trading room for day trading, the indicators, the trading strategies, everything in different offers, please refer to the link below this video in the description. So the first thing we have to understand, what is a hidden divergence? Now I have a very beautiful, simple, short, but still beautiful, powerful free ebook on the subject. Go to the trading blog of ours, vladimirribakov.com, go to Forex Education and free ebooks. Once you are there, just scroll down a little bit and you will find this book talking about the hidden divergence. Very much recommended. Download, read, enjoy. You will understand very important things. So let's first of all break down the important— the definition of hidden divergence and then the importance we have, um, in it. When it comes to trend trading. So first of all, how and what is a hidden divergence? Let me draw here. I'm going blank screen and let me draw here. Hidden divergence is a condition when you have a trend, you have some correction, and hidden or inverted divergence happens at the end of this correction and hints that a possible trend continuation comes after that. Okay, so the way it looks is basically if we take a price and we take indicator, what happens is on the price you define a trend— uptrend when you have a sequence of highs and lows going up. And in that case, you will want to see higher lows on the price. The indicator would give you the opposite or the inverted condition. While the market is making higher lows— did I say lower highs before? If I did say lower highs, it's higher lows on the price versus lower lows on the indicator. Okay, this condition is basically the inverted or the so-called hidden divergence. Now, the logic behind it is very simple and yet powerful. What happens is in the uptrend, who controls the market? Buyers. Then in the correction down here Who controls the market? The sellers. Think about it this way: on the indicator, we will be using the MACD histogram. This is my favorite indicator to spot the— made probably the most reliable way, uh, hidden divergence. So on the indicator, we will be using the histogram again of the MACD, and what happens is at that point The power of the sellers was here, but at the end of the correction, the power of the sellers is much lower than it was when the trend started. So based on the MACD, which is the mathematical approach of this indicator of what happens on this trend, the correction at the end of the correction, the sellers are trying to push so much. But despite they are trying to do so, as the mass show that on the indicator, the price is above the initial starting point. That's where the inverted conditions come in play. Okay? And that's why we assume despite their attempt to push so strongly to the downside, they failed to make a new low. And in that case, A very possible scenario is that the trend will continue up higher. In a downtrend, it would be absolutely the opposite. We will want— let's do it opposite here— we will want to see in a downtrend lower highs, lower lows. And on the indicator, which would be our MACD histogram, here we want to see lower highs, right? And here we want to see higher highs. So what happens here is lower highs and lower lows represent downtrend, bearish trend, right? And think about it this way: the buyers— this is the MACD histogram— the buyers at that point are trying to push so much that they create absolutely new peak on the MACD compared to the one where the trend started. Okay, and in that case, this is again inverted hidden divergence and a hint the trend is likely to continue down. So once we understand this part, now we want to understand what do we need to see in order to spot a reliable hidden divergence in order to use that. So to present My strategy behind that. I want to take the real trades we discussed in Home Trader Club and were shared with our members. So I want to take the pound-dollar buy and a silver buy, and I want to explain them both. The first one was the pound-dollar. We wanted to join ongoing trend. The plan of ours was to see a drop down to this trigger zone. The trigger zone was basically broken resistances that now acts as support, and from there we want to see continuation upside. So I want quickly to explain the logic behind this buy. What the way I saw it, the pound-dollar after it break this range, I expected to see a rally correction. And continuation. This is based on the weekly chart. Then on the daily chart, we started to see the market making higher highs, higher lows, and then it drops down. Beautiful. And guess what happens here on a daily chart? A bullish hidden divergence. The market is making higher lows, the indicator is making lower lows, as you can see on the histogram. The very important part, the MACD crossing from negative to positive to another negative zone. Okay, this will complete a classical bullish hidden divergence. The next important thing which we want is basically the step of verification. Verification means check the higher timeframe, make sure there is nothing against you. And like no divergences against you, for example, and then go to the lower time frame. And ideally, at the end of the correction, you would see verification divergence or signs that the buyers are also taking control, or bullish divergence on the lower time frame. This step is ideal but not always will happen. And as long as you will have key support area or demand zone that, that could be enough to join a trend as long as the other conditions in play. So weekly chart, as we just saw, broke above this range, so there is nothing against, and we expect to see the price reaching the next key levels. Okay, on a daily chart, we already saw this trending condition Higher highs, higher lows, drop down, right? Higher lows on the chart, lower lows on the histogram, and we got a bullish hidden divergence. At that point, let's put a vertical line so you will see how it looks like. We go to the lower time frame, which is the 4-hour chart, and at the end of this drop down, we see bullish divergence. So as soon as that happens, we got a beautiful buy. I was waiting a little bit more to see that it's not just a high but it also starts to make higher highs on the chart and it breaks above the trend line and as soon as it happened here that's why we— that's where we wanted to see the price dropping down to the trigger zone. Let's go back to our members area so you can see it once again. Here, okay, drop down, and from there I buy. So what happens here, this is the drop we were waiting for. And now remember the daily chart had a verified hidden divergence, right? So now take a look what happens here on the 4-hour chart. We start to see the market making its trending conditions, it pushes to the upside, and it makes higher lows on the chart Lower lows on the indicator. It's it's small here, not too much visible. But if you increase that, you will see that in that condition we got higher lows on the chart, lower lows on the MACD histogram. And at the end of this correction here, if we drop to the lower time frame to verify that we have the buys, we will figure out that we. Have these 2 waves and a bullish divergence on the histogram from negative to positive to higher negative, lower lows on the chart, higher lows on the MACD histogram, classical condition for a buy. And after that, of course, this ABCD is broken and the trend continues all the way to where we wanted it. The biggest advantage of hidden divergence is that once you spot You— and the trend continues, of course, unless the market has some, you know, surprises. What happens is the market tends to retest the previous key swing highs. In our case, this would be the first one. And of course, judging the trend from the higher time frame, it has more room to go based on the higher time frames. So this is how we spot hidden divergence. Okay? Thank you. Trending conditions for bullish hidden divergence. We want higher lows on the price, lower lows on the MACD histogram, verification that the higher time frame has no signs against, and the lower time frame ideally has a verification in terms of bullish divergence by its own. If it's missing, what you will want to see is at least a key zone, key supportive area or key demand area holding. Okay, and as long as the higher time frame trend is there, solid, stable, that would be your sign that the hidden divergence is likely to work. So the next one I want to share with you is also from the Home Trader Club trade we shared with our members. That would be the silver buy. Okay, so this is our plan— buy on the silver. I want to explain this one and we will see how this one works and what's happening next. So the analysis here, I will quickly show you. We have trending conditions— higher highs, higher lows on the weekly chart. Okay, nothing against. What do we see here while the market is making higher lows. The indicator, if you compare— very important to compare here the low where it started to the low of the, um, correction— the indicator is making lower lows, which means the sellers are trying to push it hard enough, right? But the— in terms of price, the structure Maintains the bullish momentum and the bullish structure. Higher high, higher lows. So we expect to see trend continuation. Then what happens is on the daily chart, we managed to see this corrective movement down comes to the end with a bullish divergence on the histogram. Lower lows on the chart, higher lows on the MACD histogram. Holding Above this demand area, right? Holding above the rising trend line, and in the same time, the four-hour chart completed a bullish divergence on the moving average of the MACD, on the RSI as well. Broke above the most recent falling trend line, and it continued to create the momentum of higher highs, higher lows. So for us, the plan was similar to what we saw on the pound-dollar drop down, and from there we want to see the buys, and the drop down has to create bullish condition. Now take a look on this wave, okay, between these lows, okay, what happens? We have trending conditions here. It's not too clean on the 4-hour chart, and if you have doubts If this wave is a trend, just mark vertically the, the wave you are measuring, go to the lower time frame, and you would see that if you have your waves here, that means you have your trending conditions. Okay, and what we want to see is the pullback to the downside. Let's just erase these lines for now. Once again, let's go to the members area. This is our trigger zone, broken resistance that now becomes support. We want a pullback and we want the buys. So we go here down, we enter the trigger zone, and here comes the condition of the hidden divergence: higher lows on the chart, lower lows on the indicator. What do we need to do? Trending conditions verified. We have trending conditions, we just saw that. If it's not super clean on the time frame you are measuring Check on the lower time frame. If the waves are there, you have verified trending conditions. Higher time frames has nothing against— this is the next verification. We saw the daily chart with us supporting the buys. Lower time frame ideally to have verification, but if it doesn't, we want it to hold key support and key demand levels. And here is why I say that. Take a look what happens at the end of these 2 waves. As you can see, there is no divergence here. It is lower lows on the chart and lower lows on the indicator. So the lower time frame does not verify the divergence from the higher time frame. Okay, in some cases it could happen. However, if all the higher time frames support the buys— weekly, daily and the 4-hour chart hidden divergence, it is okay if 1-hour chart in that case would miss the ideal divergence. In that case, you will want to see that the key levels are holding. In our case, this is a strong support, strong demand area. This is a broken resistance that now acts as the support. This is a rising trend line which is holding. So the structure is there. We got the trending structure. We got the ABCD correction. Yes, there is no ideal divergence here, but daily is bullish, weekly is bullish, 4-hour chart is bullish hidden divergence, 1-hour chart maintains the trending structure. You got all the verification you want to assume the trend is going to continue higher. As I mentioned before when we discussed the GBP/USD, the good part about that is that we usually get great opportunities to be trading until the next key levels. Previous swing high is the first legit zone we should be aiming, okay? And then you would, you would want to see the next key levels. So we have this important zone, this important zone, of course this important zone, which could be legit final targets if the momentum with the hidden divergence continues. So this is how you take hidden divergence, as with simple rules of verify the trending structure, make sure higher time frame doesn't have anything against you. Verify on the lower time frame that you have bullish— well, supporting divergence or key trading levels which is holding and the trending structure maintains, and you got yourself a valid trade. And in that case, the expectation of the trend continuation, uh, is legit. And in majority of times— of course, that's not 100%— if there is hidden divergence, it doesn't 100% of the time means the trend will continue. Sometimes it could be the opposite, but with very high probability, once these conditions met, the trend is here to continue. So that's pretty much it for this video. I hope you found value in it. 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