The Strategy with Divergences in Binary Options or Forex is based on finding a difference between the price that we see in the chart or quote versus the indicator or oscillator. Divergences are widely used in the financial market but ineffective in binary options with small temporalities such as 60 seconds, the main one is because the price corrects and you look for the equilibrium which means that in small temporalities the signals are not very stable.
Type Of Discrepancies Regular, Hidden And Composite
To be able to use the Strategy with Divergences in Binary or Forex Options we should work with some oscillator to be able to find the divergence, among the most used we have the CCI, the Stochastic, Momentum, the MACD, and the RSI. Once we put the oscillator, we will identify each type of divergence that we will see next.
Strategy with Divergences in Binary Options explanation
Regular Divergences
The regular divergences are the most known by the investors that start, and we must learn to identify them because many times we can confuse a regular divergence with a hidden one. The regular divergences will indicate a change in trend, that is, it will show a possible difference in the price, either bearish or bullish.
In the usual bearish divergences, we can identify them when the price is higher, while in the oscillator we find lower maximums. In the bullish regular Divergences, we recognize them when the price is in descending minimums, while the oscillator is in ascending minimums.
Hidden Divergence Or Continuing Divergence
Unlike common knowledge, divergences also help us to identify the continuation of the trend and not only turns or changes in the trend, binary signals are used to either confirm the uptrend or downtrend trend.
In the bullish regular Divergences, we identify them when the price is found in ascending minimums, while the oscillator is in descending minimums. In the regular bearish divergences, we can identify them when the price is found downward highs, while in the oscillator we find rising highs.
Composite Divergences
We can find the compound divergences when, within a regular divergence, we see a hidden or continuation divergence. Compound divergences are very common and are the leading causes of investors making mistakes when carrying out operations in the financial market since they see a formation of a continuous divergence.