Andrew Aziz. Naked Forex: High-Probability Techniques for Trading Without Indicators. Alex Nekritin. Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude. Mark Douglas. Review Jim'sBook, Trading with Divergence on MT4 is an awesome companion to the MT4High Probability Forex Trading Method - Clifton Mitchell In this book, Jim goes on to explain in greater detail what divergence is and how to recognize it.

He also provides many visual examples as well to help the reader. Divergence coupled with the already good indicators help to increase the probability of a potential winning trade. Also, with the purchase oft he book, you can gain access to the Facebook group where members share ideas and Jim updates the feed regularly with new potential trades. There is also a section where you can browse through documents and examples from the book saved in.

pdf format for easy viewing. So far,the method has worked for me and I would encourage all to try it and see what it's all about! Simple yet reliable method - Soran Bogdan They say all the great things are simple. Same applies to Jim's books. I've read 2 of them, and to me they worth more than some expensive coaching I've had in the past.

Simple, clear, concise, easy to apply. You get the strategy, the template, the indicators, plus you get author's support and access to an active Facebook group of traders - all for a tiny fraction of the cost of what others would charge. Most importantly, this strategy WORKS. I highly recommend this book.

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About the author Follow authors to get new release updates, plus improved recommendations. Read more Read less. Customer reviews. How customer reviews and ratings work Customer Reviews, including Product Star Ratings help customers to learn more about the product and decide whether it is the right product for them. Learn more how customers reviews work on Amazon.

Images in this review. Reviews with images. See all customer images. Top reviews Most recent Top reviews. Top reviews from the United States. There was a problem filtering reviews right now. Please try again later. you'll have another trick up your sleeve!!! Verified Purchase. Another great book by Jim. Again, if you are new to forex and would want to learn the basics, this is not the book for you.

Search the web and you'll find the basics for free, or you could buy Jim's other book "Forex Trading - Basics Explained" though I haven't read that one yet. This is a strategy book and won't run you through the basics of what forex is and or run you through the basic vocabularies for trading. Before you buy this book, I suggest you buy the other strategy book first - MT4 High Probability Forex Trading Method.

It would be easier to understand this if you've read the other one. If you've read that one and are looking for more opportunities to trade, then this book might be for you.

Yes, trend is your friend, but trending markets are not forever. Find good setups for ranging markets, reversals, continuation setups, etc. Now this does not talk particularly about ranging, reversals or continuation strategies, though this could also be done on those mentioned I think.

This is an additional tool on your arsenal that would give you setups when you will be finding none using trending strategies alone.

Plus, Jim gives you his own custom indicators, which gives you signal to buy or sell, which you can consider, but of course it is your own judgement call as trading against the trend or trading reversals is not as high probability as trending strategies. The most important value of this book is being invited to his group wherein he posts his setups and educate us as to why he is doing it.

Also, other guys there post what they see using this strategy and you too can post there and ask for feedback as to what the other guys see. If you are new to forex, you need a mentor and some trading buddies, this is where you can get it. Though he would definitely tell you he is not a guru. Just joined this group last week and am so pleased doing it. For the price, this is the best you can get. I have used the divergence trading method in the past and Jim's books give a clear and well explained strategy that anyone should be able to follow.

Great read and many good lessons, along with being very well priced. Jim's ongoing supports is appreciated. One person found this helpful. This book is more concentrated on Jim's latest trading strategy than in Forex itself, I would strongly recomend to at least have bought one of the 2 previous books from Jim to fully understand and get the most of this one.

Again, Jim does a really nice work on this book since you can sense his experience speaking for him all the way through it. As an author, I havent seen once who provides such personal trading support and trading instruments, as Jim does. If you are new to trading the kind of "new" who already has a trading account but isnt consistently making money then this book will clear the specific trading doubts that you have.

As an example, it really helped me in regards to stop loss order placement. Divergence, although a little bit complicated to apply to your trading at first, is explained well, as Jim does a nice work on teaching you his method. In regards to the trading system he provides, I havent really tested it but having experienced the previous one he provided and seeing the new one on the book's charts I will test it, and I truly hope it can improve my trading since the last one really surprised me on it's performance and my profits.

It is important for you know that a trading system is NOT all you need to make money. I read all of Jim's trading books, and this one put everything together for me in an invaluable way. The divergence trading strategies outlined in this book are by themselves worth its price.

But the reader gets the bonus of a comprehensive review of Jim's High Probability trading method. This acts as a thorough refresher of the concepts outlined in more detail in Jim's High Probability Method book, and I definitely feel this allowed me to get a much firmer grasp of Jim's trading system as a whole.

I was completely new to forex trading a few months ago, and after reading and re-reading about a dozen introductory books on the subject, I have come to the conclusion that Jim's books have provided me the best bang for my buck. I just closed my very first month of live trading with a profit, and can fairly say that Jim's method is the foundation of my own. At least for me, it did help to have a bit of a more in-depth review of the basics before I started implementing Jim's method on a demo account, so I highly recommend reading his "Basics" book first.

After that, my personal favorites for reviewing and the basics are BabyPips. See all reviews. Top reviews from other countries. Hi All, I have been using Jim's strategy with the free indicators that are provided with the book for about a month now and so far making a good profit. Jim also provides daily updates in his FB group which are a great help. I would therefore thoroughly recommend this book. Good luck in your trading! I highly recommend this book to anybody wanting to learn about Divergence.

This is the 3rd book in the series written by Jim, he also explains the High Probability method of trading the 2nd book , but this one focuses on Divergence. The topic is well explained with several examples of how to spot them, what to do when you spot them and potential pitfalls in scenarios when they don't quite work in your favour but also strategies to recover from those pitfalls.

Divergence is an excellent tool, something like a cheat sheet as Navin Prithyani also says in his videos that would to tell you something's not adding up like a leading indicator and there is either going to be a likely reversal in the current trend or the original trend momentum will pick in the direction agains, depending on the type of divergece. I will personnally be impleneting this in my own strategy to confirm my decisions on when to take trades against the trend or with the trend.

Cheers Jim, great read! In this book Jim goes into detail on using divergence for trading, and provides clear examples of how to use this concept in your trading, the custom indicators needed are provided for MT4 and Trading View. Very useful book, method can also be applied to other financial instruments as the key concepts are trading pullbacks in a trend, and trading trend reversals.

Report abuse. This collection goes direct to the most important. Really good job and I recommend it to anyone. Experienced traders, part time traders, a rookj޶ܿveryone. Congratulations Jim Brown! As with the earlier book, it is very easy to read and it describes in plenty of detail without being too long the concept of divergence and how to use it to make trades with a high probability of succeeding.

And as with the previous books, Jim provides links to the relevant MT4 indicators for you to download and use yourself, along with an invite to join his Facebook group.

I'm a big fan of Jim - he reeks of integrity and genuiness and invites you to follow his trades and is always willing to offer advice based on his experience. I've not started trading with this strategy yet, as I'm steadily growing my confidence with the basic high probability method first - but I am keeping an eye out for divergence on my charts and I will undoubtedly dip my toe in very soon! Your recently viewed items and featured recommendations.

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It is a bad error. So, you can easily spot a divergence in the price chart. Let us now explore different types of forex trading divergences. Basically, there are three major types of divergence. They are regular divergence also, classical or normal , hidden divergence, and extended reverse divergence. The above table outlines basic divergences. You see that each divergence type subdivides into bullish and bearish negative and positive.

Common, regular divergences signal the trend reversal. Other types of divergence hidden and extended signal the trend continuation, they are also called reverse divergence.

Many confuse convergence and divergence. Let us clarify these concepts. Diverge means to deviate. In trading terms, it means any deviation in the price trend and indicator. Convergence is the opposite of divergence.

Convergence derives from the Latin word 'convergo' — get close. Therefore, convergence is a type of divergence, when the price trend and the indicator line are meeting. To spot bullish divergence, you need to analyze the price lows and the lows recorded by the indicator. The price chart should hit a lower low, but the indicator should signal a higher low the left side of the table. Blue lines in the chart mark the regular bullish convergence. The price hits a lower low forming a double bottom pattern, but the MACD paints higher lows.

In trading, such regular divergence signals a soon reversal of the bearish trend. To find out a regular divergence bearish, you should analyze the price highs and the highs painted by the indicator.

The price should be making higher highs, but the highs on the indicator are getting lower the right side of the table. The regular bearish divergence signals that the bull trend should turn down soon, so one could enter short trades. The above chart displays the regular bearish divergence. The security price hits a fresh high, but the MACD histogram fails to break through the previous highs.

Therefore, the price trend should soon turn down. Hidden divergence forex is the opposite of the regular divergence; it suggests the trend continuation. A hidden bullish divergence occurs when the price hits higher lows while the indicator forms lower lows. Hidden divergence bullish signal appears in an uptrend; it suggests trend continuation. The left side of the above table displays an example of a hidden divergence.

The price lows, connected with a blue line above, are getting higher. The MACD lows are getting lower. Therefore, there is a hidden bullish divergence that means the trend continuation. To spot the hidden divergence bearish, we shall analyze the price highs. The price, following a downtrend, is making lower highs, while the MACD is hitting higher highs. A hidden bearish divergence appears in a downtrend; it means that the expected reversal is false, and the trend is likely to continue.

It is displayed on the right of the reference table. The above chart shows a bearish hidden divergence. The price highs are getting lower, while the MACD highs are getting higher.

The downtrend continues. Extended divergence forex is similar to the hidden divergence. However, the extended divergence often fails to observe the basic rules as it frequently occurs in sideways trends. Many traders do not consider the extended divergence as a trading signal, suggesting it be a false one. Extended bullish divergence is accompanied by rising lows. In the bearish divergence, the highs are getting lower. Let us see the examples in the table.

The above figure displays the extended bullish divergence on the MACD indicator. The price lows are roughly equal slight deviations are acceptable. However, the MACD second low is higher than the first one.

This divergence signals the uptrend continuation. The bearish divergence is also identified based on the indicator data; the MACD paints a lower high. It means that the price will continue falling, so one could enter a short position. The EURUSD chart above displays the extended bearish divergence MACD, which suggests the downtrend continues. There could be slight deviations, but the highs are roughly equal in the first and second charts.

The signal appears in the sideways trend, which is a typical feature of the extended divergence. Beginner traders often come across false information about divergences on the Internet. Below I will discuss the most common mistakes when trading with divergences:.

On many Forex trading websites, I noticed that authors wrongly identify divergence. They suggest that if the indicator is moving up, the line drawn across the indicator peaks is showing real highs.

Based on this, they connect the highs in the price chart with the line. Similarly, in the case of the downtrend, when the indicator highs are below the zero line, they connect the price lows in the chart. In other words, they believe that if the indicator shows a decrease, they need to connect the lows; and if it shows an increase, then they connect the highs. The second most common error is when traders identify divergence simply by connecting adjacent peaks of the indicator bars.

But they do not monitor whether these peaks occur within the same trend. Another example of false divergence, when traders think that if in the indicator chart, there is an upward slope, and in the price chart, there is a downward slope; this is convergence.

It is a mistake! Many traders also make a mistake when they analyze the divergence of the price highs and the indicator lows. If you discover a divergence, make sure that the indicator highs and the price high occur at the same time. You should not analyze the price extremes that occur at different times! Divergence, being an early indication, features quite many false signals. It is a big mistake to trade only according to divergences!

Do not consider the divergence that has been followed by the price moves. They must have worked out, being false ones. Another common mistake is thinking that divergence is only a reversal signal. Depending on the divergence type, it may signal both a trend reversal and continuation. If you have been reading this article from the beginning, you can already discover the divergence signal.

Open your trading terminal right now and try to find divergences yourself. What type of divergence have you found? What does it indicate? Then, go back to the list of mistakes and make sure you avoid them.

The practice is the best way to remember theory. Well, we have studied the theory. Now let see practical trading divergence signals in different financial markets. A regular bearish divergence forms at an expected end of a trend.

Traders often describe such situations as the trend is exhausting. The above chart displays a bearish divergence. It is marked with blue lines. So, you see that the trend should reverse soon, but we should have a confirming signal. To define the entry point, we shall use the signal when the trendline dark-green line is broken.

When the reversal bar closes below the trend, we enter a short trade. I marked the entry point with blue. We set a stop-loss a little higher than the next local high red line. To fix the profit, we shall use a take-profit that is twice as big as the stop loss green line.

The price goes down, and we take the profit. Regular bullish divergence is a perfect reversal signal. Just like with the bearish divergence, we should use the trendline breakout as an entry signal. The above chart displays a perfect bullish divergence signal. The price is in the bear trend. Sometime later, there are two consecutive regular bullish divergences. I marked them with different colors. I will explain this phenomenon later. Now, we should just take this fact into account.

Now, we just consider it just like a strong reversal signal. When you use trendline to detail entry points, you should be able to draw it correctly. The downward trendline starts from the first trend high to the last local highest high in our example.

In the previous example, with the bullish trend, the approach was the same, but the trendline was drawn across the lows. Let us go back to our example. After the first bar closes above the trendline, we enter a long. I marked it with the blue horizontal level on the chart. Like in the previous example, we set a stop loss a little lower than the last local low. The take profit is twice as big as the stop loss.

I should note that taking a profit that is twice as long as the stop loss is not always efficient. In our case, we have to wait for a profitable trade for a month. You can exit the trade based on the combination of the divergence signal with other indicators and trading strategies. I will deal with this in detail a little later. Unlike the previous two divergence types, this signal means the trend continuation. You can use extended bearish divergence to enter in the trend, following a failed reversal.

The above chart displays a common case of extended divergence. There is extended bearish divergence, where the indicator hits higher highs while the price highs are getting lower marked with blue lines. This signal should be followed by a false trend reversal. To determine the entry point, we use the moving averages MACD, namely their breaking the zero level downside. Usually, when the MACD moving averages go into the positive zone, it is seen as a trend reversal signal. However, taking into account hidden bearish divergence, we expect a false breakout of this level.

So, when the indicator goes back into the negative zone, we enter a short trade. A stop loss is set a little higher than the first high of the convergence formed red line. It is clear from the above chart that the take profit, which is two times more than the stop loss, is hit by the price and exits our trade with the profit.

This signal mirrors the previous one. It also suggests the trend, this time uptrend, will continue. It is clear from the above chart that the MACD histogram forms lower lows, while the price chart indicates the uptrend.

I marked the extended bullish divergence with the blue lines. Like in the previous case, we expect a false reversal of the trend. The MACD moving average do not confuse with the signal line!

goes below the zero level for a moment and goes back. This is a buy signal! I marked it with the blue level on the currency pair price chart. We set the stop loss like in the case with the previous trade; only it is below the price low.

The target, double distance of the stop loss, is reached quite soon. It is quite a common situation in trading divergence signals. Let explore the third point in more detail. To filter out false signals, you can use supplementary technical tools, price action patterns, graphic chart patterns.

Let us study how to filter false signals using Bollinger bands. The above figure shows an example of a false divergence between the price chart and the MACD histogram. Following the divergence signal, the price starts moving down, and even the MACD moving averages foes into the negative zone.

However, the price fails to consolidate below Bollinger bands, which means the price is likely to be consolidating rather than trending. The Bollinger bands get close in the zone of the red circle, where the price goes into the opposite zone. It cancels the bearish reversal signal.

I explained how to set up the Bollinger bands indicator and trade with it on Forex in the article. To filter false signals, you can use other trend indicators. Any additional signals delivered by trend indicators are stronger than the divergence signals. So, having learned the theory and the practical application of divergence, we can make up a step-by-step guide to trading divergence in forex. This is a basic strategy you can base on in trading forex. It could be quite a good guide for newbies.

Try yourself in trading divergence. Enter the terminal without even registration in a couple of clicks, spot the divergence, and build your trading strategy. Regardless of which trading method you use, you should always apply stop loss and take profit. At the right time, only these two tools will save your deposit and help you fix your profit.

If trade divergence signals, you set a stop loss above the highest high for a bearish trend and below the lowest low for a bullish trend. The above figure displays an example of a reasonable stop loss, marked with the red line. It is a bearish divergence, so the stop loss is set a little higher than the local high. In the case of the inverse divergence, you set a stop loss beyond the local price extreme that is within the divergence pattern.

Trading divergence suggests following the trend. So, you can exit the trade according to any reversal signal. I recommend beginner traders to set the take profit at a distance twice as long as that of the stop loss; this is a simple and winning trading strategy.

Traders most often use oscillators divergence in trading. The best divergence indicators mt4 are MACD, RSI, stochastic, OA. They are user-friendly and simple but provide quite accurate trading signals. You can learn more about stochastic oscillator trading forex in the article Stochastic Oscillator: guide for using indicator in Forex trading. Each forex divergence indicator offered above is unique and has its own features and accuracy degree suitable for particular financial markets.

Divergence principles will work with any technical indicator. So, you can use any oscillator that suits you best. In the previous examples, I have already used the MACD divergence indicator.

MACD stands for moving averages convergence divergence. The MACD indicator is composed of three elements:. To find out the divergence, you can use the histogram, as I described above. Or you can use the primary MACD line.

I will explain the second way below. Diagonal lines in the chart above highlight the MACD bullish divergence. Note that we shall define bullish and bearish divergence MACD according to extreme points of the MACD line blue line in the chart , not the signal line. I marked the entry point with a blue level.

The RSI indicator relative strength index identifies the overbought or oversold zones, themselves as entry and exit signals. Another strong trading signal is the RSI divergence indicator. Like in the previous examples, there can be bearish and bullish divergence RSI. Blue lines mark the divergence between price highs and RSI highs.

So, there is a bearish divergence RSI. I enter a trade when the RSI line goes outside the overbought zone blue horizontal line in the chart. I exit a trade when the RSI oversold signal is sent. I marked the point with the green circle in the chart above. If you want to learn more about the RSI indicator, you should read the article about the Relative Strength Index — RSI indicator. Stochastic is another popular oscillator used in divergence trading.

It is composed of two lines that often interact with each other. Like the RSI, a stochastic divergence indicator finds out the overbought or oversold state of the market. Stochastic forex trading strategy divergence suggests spotting convergences and divergences between the price bars and the main indicator line.

Blue diagonal lines mark a regular bearish divergence. An additional entry signal is delivered when the indicator line goes outside the overbought zone. The entry level is marked with the blue horizontal line. This signal is marked with the green circle in the above chart.

The hidden stochastic oscillator divergence is determined according to the same rule as in the cases with the MACD and RSI. The above chart shows an example of the bullish divergence stochastic. You see that the same rules work as for the MACD. The second low of the indicator is lower than the first one in an uptrend.

Some foreign exchange traders regard oscillator divergences as the holy grail of technical analysis. Others consider these elusive chart patterns to be virtually useless. The truth probably lies somewhere in between. The purpose of classic divergence is to recognize a technical imbalance between price and oscillator, with the assumption that this imbalance will signal an impending directional change in price.

The first trade turned out like a dream. The second left much to be desired. For the first signal in dark red , which occurred between November and December of , we have almost a textbook case of classic bullish divergence. Price drastically hit a lower low while the MACD histogram printed a very obvious higher low. According to proponents of divergence trading, this type of price-oscillator imbalance foretells a price correction of the imbalance.

In this case, the correction in price would need to have been a directional change to the upside. That is exactly what happened. Like clockwork, as evidenced by the chart above, price turned up in early December and did not look back until the second divergence was completed.

This first divergence signal was so strong that there was even a mini divergence shown in Figure 1 with dark red dotted lines within the larger divergence that helped to confirm the signal to go long. Luckily, some of the subsequent bull run was caught as a result of spotting this very clear divergence signal early on. Anyone who caught this particular divergence play was richly rewarded with almost immediate profit gratification.

Below, we will explain the method I used to trade it. The second divergence signal seen in dark blue , which occurred between mid-December and mid-January , was not quite a textbook signal. While it is true that the contrast between the two peaks on the MACD histogram's lower high was extremely prominent, the action on price was not so much a straightforward higher high as it was just one continuous uptrend. In other words, the price portion of this second divergence did not have a delineation that was nearly as good in its peaks as the first divergence had in its clear-cut troughs.

Whether or not this imperfection in the signal was responsible for the less-than-stellar results that immediately ensued is difficult to say. Any foreign exchange trader who tried to play this second divergence signal with a subsequent short got whipsawed about rather severely in the following days and weeks. However, exceptionally patient traders whose last stop-losses were not hit were rewarded with a near-top shorting opportunity that turned out to be almost as spectacularly lucrative as the first divergence trade.

The second divergence trade did not do much from a pip perspective. Nevertheless, a very significant top was undoubtedly signaled with this second divergence, just as a bottom was signaled with the first divergence trade. So how can we best maximize the profit potential of a divergence trade while minimizing its risks? First of all, although divergence signals may work on all timeframes, longer-term charts daily and higher usually provide better signals.

As for entries, once you find a high-probability trading opportunity on an oscillator divergence, you can scale into position using fractionally-sized trades. This allows you to avoid an overly large commitment if the divergence signal immediately turns out to be false. If the trade becomes favorable, on the other hand, you can continue to scale in until your intended trade size is reached. If momentum continues beyond that, you should hold the position until momentum slows or anything larger than a normal pullback occurs.

At the point that momentum wanes, you then scale out of the position by taking progressive profits on your fractional trades. It is pretty safe to say that there is at least some validity to oscillator divergence signals, at least in the foreign exchange market. If you look at the recent history of the major currency pairs, you will see numerous similar signals on longer-term charts like the daily , that can provide concrete evidence that divergence signals are often exceptionally useful.

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Contact with Jim should you require any clarification on this trading method. The divergence trading strategies outlined in this book are by themselves worth its price. Bullish divergences are used to trade the change in direction from a downwards move to an upwards move. It is not as easy as some would make you believe, but if you keep it simple, control your money management, and be consistent, then there is no reason that you too shouldn't succeed in the world of Forex trading. You can now supercharge your MetaTrader 4 and MetaTrader 5 trading platforms with the Supreme Edition plugin completely free.

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