Divergences are contradictions between price movement and an indicator’s signals (RSI, MACD, Stochastic).

There are two types of divergence:

1. Regular divergences

• Bullish ↔ Lower Lows on price – Higher Lows on indicator ↔ Bullish reverse sign
• Bearish ↔ Higher Highs on price – Lower Highs on indicator ↔ Bearish reverse sign

2. Hidden divergences - they "hide" in the trend – trend continuation sign

• Bullish ↔ Higher Lows on price – Lower Lows on indicator
• Bearish ↔ Lower Highs on price – Higher Highs on indicator

! The divergences are conditioned by the existence of Higher Highs/Lower Lows/a Double Top or a Double Bottom.
! Between price’s Highs and Lows and indicator’s Highs and Lows must be a perfect vertical alignment.
! Don’t try to catch the divergence from behind.
! It is recommended to identify divergences on H1 or higher timeframes.

Pivot points - commonly used for short-term trades:

• as Support / Resistance levels – trading the bounce or the breakout
• to distinguish simple false breakouts from real breakouts
• during a sideways trend, to identify potential reversal points
• to identify the market sentiment - generally, if the price goes above PP - Buy signal / if the price goes below PP – Sell Signal.

They are automatically placed by the trading platform, sometimes along with intermediate levels.

Usually, most of the trades take place in the PP - S1/R1 range.
It is recommended to use them in correlation with other graphical tools such as Japanese candlesticks, indicators and usual Support and Resistance levels.

Other types of pivot points:

• Woodie Pivot Point
• Caramilla Pivot Point
• Fibonacci Pivot Point.

Elliott Wave Theory – used to identify price fluctuation cycles, depending on the reaction of market participants or population to fundamental factors.
These cycles imply a trend, structured on 5 waves - 3 of them are impulse waves (respect the trend) and 2 of them are corrective waves.


Subsequently, these 5 waves are followed by a three-wave corrective formation called the abc formation. The abc pattern may appear as:

• Zig-Zag Formation

• Flat Formation

• Triangle Formation.

Elliott waves are fractals ↔ can be divided into smaller waves with the same peculiarities as the initial formations - Impulse waves (1, 3, 5) can be divided into other 5 waves and corrective waves (2, 4) in other 3 waves.

Basic Rules of Elliott Wave Theory

1. W3 is not the shortest impulse wave.
2. W2 does not exceed the level at which W1 has started.
3. W4 does not reach any of the W1 levels.

Practical situations

• Sometimes W5 extends only to the ending level of W3.
• Often, W5 breaks the trend line.
• W3 is usually sharp and expanded.
• W2 and W4 are often rejected from Fibonacci Retracement levels.