There are certain positions in Forex trading when you will have to choose divergence trading. For example you may have to resort to divergence trading when there is a low risk in selling near the top or buying near the bottom.
Or in case you know the best time to exit ahead of time if you are in a long position. You can use trading divergence even when a currency pair continues falling and you would like to short it for a better price. The best part of divergence trading is that you can use it as an indicator for the prices. You can use divergence trading on indicators such as MACD, CCI and RSI. It is actually the price action that is compared against the above mentioned indicators.
Trading divergences cab be a little difficult in the beginning to follow but it can prove to be a useful tool over a period of time and it does not take much time to master. The process can help you minimize the risks in your trades.
There are two types of divergence trading. The first type is called regular divergence where the price is making highs but the indicator is not showing any movement. Similarly the price can also make lower lows. The other type is called hidden divergence where indicator is making higher highs or lower lows but the price is at the same level. With the help of divergence trading you will add an essential tool to your Forex trading career.