Stochastic Divergence Strategy: High-Probability Reversals
Stochastic divergence is one of the highest-probability reversal signals. Learn the strategy and when to use it. Stoch setups tuned for CFDs, with divergence.
What Is Stochastic Divergence?
Divergence occurs when price makes a new extreme but the Stochastic Oscillator does not, indicating weakening momentum.
Bullish Setup
Price lower low + Stochastic higher low (below 20). Wait for %K cross above %D. Enter long. Stop below price low.
Bearish Setup
Price higher high + Stochastic lower high (above 80). Wait for %K cross below %D. Enter short. Stop above price high.
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Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.