Divergence trading system is undoubtedly one of the most effective trading schemes, because it basically tells you when a trend starts to run momentum. So when it looks like things would happen, you can have more confidence in trade comes at the beginning of this new trend.
These differences occurred models of each different time period and they are pretty easy to spot. You can use different technical trading indicators to help you, but I personally think that the MACD RSI Trading System indicators are two of the best you can use these differences to observe patterns.
What you are basically looking for is the price to go up (and ideally creating new heights), but the MACD RSI Trading System indicators are not to make new highs. The fact that these indicators are not to make new highs tells you that the trend growth is running out of steam, and may be about to change.
Similarly, if you are looking to go long in a downward trending market, the price you want to make new lows while the MACD RSI Trading System indicators are not to make new lows.
I probably did not explain that very well, so let me give two recent examples from the daily chart GBP / USD.
In the first instance, marked with points 1 and 2 can be seen that when prices headed up towards 1.6750 (in point 2) and MACD RSI Trading System were lower than they were in point 1. So although this is not a perfect divergence pattern, because the price does not actually make new heights, it was another excellent trading signal to go short when the MACD crossed downwards (indicated by red arrow).
The second example, indicated by points 3 and 4, is more divergence from the classic pattern, because the price made a new low in point 4, but the MACD RSI Trading System were actually higher at this point than they were in point 3. So this is another indication that this trend was running out of momentum, and I can see that when the MACD crossed up (indicated by green arrow) had a very nice twist of the head.
So as I said, these differences occurred models of each different time period and can be extremely profitable. However, in my experience it's usually best to use a longer time frame to avoid getting many false signals.
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