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Author: George Stark Article source: http://www.articlealley.com/. Used with author's permission.
Although divergence trading is not a new stock trading method it nevertheless is a powerful one. Through divergence trading you can take advantage of market trend reversals and uncover profit opportunities.
By locating trend reversals that other traders miss you can position yourself to benefit from hidden trading movements. This can be accomplished whether the market is bearish or bullish. Just by simply knowing which direction the market is going through divergent tracking you can realize considerable profits.
The divergence trading formula is an uncomplicated and straightforward method composed of simple indicators and simple rules that multiplies the power of trend reversal. The method consists of 3 elements: exponential moving average, simple moving average envelopes and stochastics. By monitoring these three indicators you can spot divergent trends that will forecast price changes you can exploit.
Also divergence trading is compatible with the more commonly used trend-following method. By coupling divergence trading with trend-following trading you can profit from both sides of any transaction and not leave any money on the table. And the best thing is that divergence trading can be applied to any trading market whether it be Forex, day trading, options, futures, etc. Divergence trading is multidimensional and can show you where to enter a trade, when to stop a trade and where to take profits.
So if you are a newbie stock trader or a seasoned veteran it will pay to learn how divergence trading can diminish your stock trading risks and make your trades more profitable. Add divergence trading to your stock trading toolkit and watch your trading profits grow.
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