Bearish Divergence: One of My Favourite Forex Trade Setups

This is one of my favourite forex trade setups.

You need to look for a trend and pay attention to the MACD histogram indicator.

If the trend is up and the MACD histogram is getting weaker, then bearish divergence is forming. If the trend is down and the MACD histogram is getting stronger, then bullish divergence is forming.

These are both signs of potential market exhaustion.

Once this occurs and you receive a candle confirmation that the trend is turning, you can make a trade in the opposite direction. Your stop would be placed beyond the most recent market extreme. In this case, it would be beyond the most recent market top.

This trade setup works about 75-85% of the time and usually, the profit potential is anywhere from 300-500 pips. Good luck!

Disclaimer: Do your own homework. Do not in any way take this to be investment advice. You are responsible for your own portfolio.