It seems pretty reasonable to think about regular divergences as something to look out for in the Forex market, but what is the deal with hidden divergences?
One of the things that you will notice about hidden divergences is that they are often a sign of a trend continuation. What this means is that while a traditional divergence may point you toward the idea that the trend in a currency pair is about to reverse, a hidden divergence does the opposite. It indicates that a trend may be ready to continue.
Hidden Bullish Divergence
A bullish hidden divergence is when the price of a pair makes a higher low than it did before, but the oscillator makes a lower low, then you may be looking at a hidden divergence that is pointing towards trend continuation. This particular setup may mean that the pair is ready to rocket higher, and it is your job to decide if you are going to place a buy order to take advantage of this move or not.
Hidden Bearish Divergence
The opposite of the bullish divergence is a bearish divergence (naturally). If the price has made a lower high, but the oscillator has made a higher high, then the trend may be ready to continue downward.
At the very least, you should steer clear of buying the pair at this time, and you might even consider going short on the pair to take advantage of some of the downside moves if you can capture them.
Hidden Divergence vs. Regular Divergence
Associate Hidden Divergence with the possibility of trend continuation.
Regular Divergences most likely signal trend reversal.
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