In today forex faq, we will be going through divergence trading and below is the question from our fellow trader.
Do you ever trade divergencies?
I would like to know how many pips you set for your stop/loss and target/profit when you trade divergencies.
Thanks for the work you do on the blog, your book is very educative as well
Yes I do trade divergence time to time. There are several type of divergence and the most common one that I use is the MACD divergence.
If you have listened to my video trading signal that I have prepared for you guys on my new site http://www.myforextradingsignals.com, you will see the power of MACD divergence.
After sending out the emails, the price has moved up tremendously and that shows the power of MACD divergence.
For the stop loss, it really depends on the currency pair you are trading. If you are trading those pairs that are less volatile, a 20 pips will usually do the job. However if you are trading GBPJPY or GBPUSD that are more volatile, you may need more.
As for the target profit, you can either make use of the trend line projection that you have learned from my forex trend line book or make use of major support and resistance level to exit your position.
For those of you who are not sure what is MACD divergence, you can take a look at this post that I have written some time back and then visit my new forex trading signals site to see the video that I have posted.