The Knoxville Divergence is an automatic price action indicator for MT4. It deeply tracks price movements and changes in market momentum to plot useful divergence signals.
Technically, divergence is an advanced trading strategy where technical experts anticipate trend reversals based on irregular price movements. For beginners, assessing accurate price divergence setups may be complex.
Furthermore, a wrong interpretation of divergence signals may lead to bad trading decisions and damage your trading balance.
This guide explains how to trade divergences like a pro using the Knoxville Divergence indicator in MT4 platforms.
What is the Knoxville Divergence Indicator?
The Knoxville Divergence combines the Relative Strength Index and Momentum indicators for determining correct divergence signals.
It applies oversold and overbought RSI values and the difference in momentum and market movements to spot trend reversals. The indicator thus offers a head start warning for both bullish and negative trend reversals. Therefore, forex traders can utilize the divergence signals to ensure the appropriate placement of buy-sell orders.
The indicator can perform well on multi-timeframes, including hourly, daily, and weekly charts. Additionally, the indicator can be used by both novice and experienced forex traders. Novice forex traders can use the reversal signals while anticipating swing trading opportunities.
Advanced forex traders, on the other hand, can combine the indication with other technical instruments and trade in concert with them. Besides, the indicator is free to download and simple to set up for forex traders.
Knoxville Divergence Trading Strategy
The indicator’s trading signals are generated from price momentum and oversold/overbought positions. These levels are changed into indications for buying and selling stocks. For sell signals, the indicator sets the red lines above the candles; for buy signals, it places the green lines below the candles.
Therefore, forex traders could take a long position while entering the market with a stop loss limit below the preceding swing low. The indicator gives no potential price goal for realizing profits. Therefore, forex traders could either use additional techniques to find potential profit targets or book profits after achieving a reasonable risk-to-reward ratio.
Buy Signal
Consider the following conditions while determining a buy signal:
- The indicator plots a green trendline below the price candle, connecting recent market lows.
- The price reverses for a bullish move from the ending point of the green trendline.
Sell Signal
Assess the following conditions while determining a sell signal:
- The indicator plots a red trendline above the price candle that connects the recent market highs.
- The price reverses for a bearish move from the ending point of the red trendline.
Knoxville Divergence Pros & Cons
Pros
- Spots hidden divergence patterns and plots instant trade alerts.
- Comprises powerful indicators like RSI and Momentum signals.
- Simple to use and suits beginner-level traders.
Cons
- Doesn’t indicate the strength/weakness of the divergence setups.
- Requires confirmation from additional indicators.
Conclusion
The Knoxville Divergence is a must-have tool for technical traders who applies divergence trading strategies for anticipating buy-sell signals. It saves time and, most importantly, makes an easy demonstration of the divergence signals which both expert professionals and novice traders can read. However, because the indicator provides reversal signals, traders should verify the potential divergence setups with additional technical indicators.
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