The FXCX Divergence indicator for MT4 finds trade entries and exits based on price and moving average divergences. In MT4 charts, FXCX Divergence has a straightforward visual design. However, it is a versatile instrument that allows for various possibilities such as position trading and scalping.
What is the FXCX Divergence Indicator?
The FXCX Divergence is a technical price-action indicator in MT4 charts that delivers trend reversal signals. In addition to divergence, it detects potential price swing levels and market highs/lows, allowing you to forecast buy/sell positions.
It identifies strong price divergence scenarios using a 21-period Relative Strength Index (RSI). Furthermore, it filters its signals in the background using crossovers between 5- and 13-period Exponential Moving Averages (EMA). Because the indicator merely plots arrows to highlight divergence locations, you can use additional indicators on your chart to complement the FXCX Divergence Indicator.
FXCX Divergence Strategy
FXCX Divergence uses an EMA and RSI combo to determine price divergence indications. The RSI identifies divergences, whereas the EMA determines trend conditions for filtering trade signals. When both tools show the same trading direction, the indicator sends out arrow signals to establish whether the divergence is bullish or bearish. The yellow arrow at the bottom of the chart indicates a positive divergence. The aqua color arrow at the top, on the other hand, signals the creation of a bearish divergence. When we obtain such trend reversal signals, we may filter them by taking into account other technical factors in order to assess buy/sell situations.
Buy Signal
These could be your checklist for a buy trade:
- When the trend of the asset being traded is bullish.
- When a yellow arrow pops up on the chart.
Once these events occur:
- You could open a buy position after you confirm your entry with bullish candlestick patterns.
- You could set your stop loss just below the nearest swing low.
- You could set your take profit at the nearest resistance zone, or you could exit trade when an aqua arrow pops up on the chart.
- For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Sell Signal
These could be your checklist for a sell trade:
- When the trend of the asset being traded is bearish.
- When an aqua arrow pops up on the chart.
Once these events occur:
- You could open a sell position after you confirm your entry with bearish candlestick patterns.
- You could set your stop loss just above the nearest swing high.
- You could set your take profit at the nearest support zone, or you could exit trade when a yellow arrow pops up on the chart.
- For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
FXCX Divergence Pros & Cons
Pros
- The FXCX Divergence Indicator can be used by traders to identify divergence scenarios when trading.
- The indicator may also be used to identify possible zones to enter trades during a trend reversal.
Cons
- The FXCX Divergence indicator does not give trade exit alerts.
- The divergence principles of this indicator may not be easily grasped by novice traders.
Conclusion
Divergence trading is highly regarded by forex and stock traders for its ability to analyze powerful trade signals. It is, however, an advanced trading method that is generally advised to experienced traders. When using this indicator, you may also want to add one or two additional moving averages for signal filtering and test it with demo accounts. When you start seeing consistent positive outcomes, you may then proceed to implement your FXCX Divergence trading method in live markets. Note that this indicator does not guarantee profits.
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