Stochastic Divergence Indicator
Platform: MT4 Type: Oscillator Last update: September 28, 2024The Stochastic Divergence Indicator for MT4 automatically recognizes divergences between price and Stochastic Oscillator. When the signal is spotted, it plots a buy/sell arrow accordingly. That technique defines the potential reversal of the market.
How to use the stochastic divergence in practice?
The Stochastic Divergence Indicator connects the peaks and dips of the Stochastic Oscillator as well as its corresponding peaks and dips of the price bars. When divergence is in place, an upward arrow is placed for bullish divergence and a downward arrow for bearish divergence. The best signals come from overbought or oversold price levels. Detailed instructions are provided below.
Buy Signal
Follow these steps for a long trade:
- Stochastic Oscillator reaches oversold level (below 20)
- Price makes higher low and then lower low and the indicator connect these points with yellow line
- Stochastic Divergence connects its recent dips with yellow line and then shows upward blue arrow
- Buy trade is triggered after the above conditions are met
- Set stop loss a few pips below the last swing low of the market
- Take profit or exit trade whenever the price reaches the recent resistance level or use your own method of trade exit
Sell Signal
Follow these steps for a short trade:
- Stochastic Oscillator reaches overbought level (above 80)
- Price makes lower high and then higher high and the indicator connect these points with yellow line
- Stochastic Divergence connects its recent dips with yellow line and then shows downward red arrow
- Sell trade is triggered after the above conditions are met
- Set stop loss a few pips above the last swing high of the market
- Take profit or exit trade whenever the price reaches the recent resistance level or use your own method of trade exit
