Indicator Stochastic Divergence, Advanced Trading System

Time Frame H1

Currency pairs: any

Indicators:

1. 100 period Bollinger band

2. 200 period Bollinger Band

3. 100 period SMA (simple moving average)

4. 200 period SMA (simple moving average)

5. 14/7/3 Slow Stochastic.

Stochastic Divergence

Divergence occurs when the price action on the chart is either still going up,and the stochastic is coming down, or visa versa. The entry rule for this setup requires the following: When buying, the stochastic should have been initially oversold (below 20). After this, the price action continues lower, whilst the stochastic begins to climb higher. The entry takes place during this process, when a  entry signal occurs (reversal candle against support and 200 SMA/Bollingers) When selling, the stochastic should have been initially overbought (above 80). After this, the price action continues higher, whilst the stochastic begins to move lower. The entry takes place when a G7 entry signal occurs (reversal candle against resistance and 200 SMA/Bollingers. This type of entry is best described using chart examples, and the following 4 charts illustrate the divergence entry.

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