Usually the price action will eventually correct itself in the direction of the divergence.
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The key is to identify the divergence and this is done by using the line tool to trace the highs and lows of both price and indicator. Once the divergence opportunity has been identified, the next step is to look for a reasonable signal of trade entry in the direction of divergence correction.
Usually the trend line which connects either the price highs or lows can be used as a support CALL or resistance line PUT so that when price abuts on these lines, trades can be initiated. Extend the trend line ultmate binary options the price lows and once a reversal signal forms, initiate a CALL trade.
See example above. Expiry The trade is set to expire at the closing price of the 3rd candle, counting from the entry candle.
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We can see from the chart above that there were 2 trade opportunities which would have ended in profit had they been taken. However, this will come with a reduced payout.
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PUT Entry Rules: A PUT entry is made when the following indicator pattern is displayed on the chart: The indicator line is forming lower highs when price is forming higher highs. Extend the trend line plotting the price highs and once a candle forms and is rejected at this price trend line, initiate a PUT trade.
See example below. We can see from the chart above that there was a single trade opportunity which would have ended in profit had it been taken.
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Reliance on this indicator however requires the trader to know how to apply the line tool to spot the divergence areas. The key to trading the divergence is to make sure that the trader is able to look for the bounce of the candlestick ultmate binary options which the entry can be made on the trend line which shows the higher high or lower low on the chart.
The divergence always corrects in the direction of the indicator. Share Now!