Stochastic Divergence Indicator (MT4) - Free Download - Best Forex Indicators

Introduction to the Stochastic Divergence Indicator

The Stochastic Divergence Indicator automatically recognizes divergences between price and Stochastic Oscillator. When the signal is spotted, it plots a buy/sell arrow accordingly. That technique defines the potential reversal of the market.

The Stochastic Divergence Indicator fits all kinds of timeframes and currency pairs. It is displayed in a separate window placed just below the main trading chart. The default settings can be modified directly from the input tab. Feel free to experiment with the settings and parameters to fit your personal preferences.

How does it work? How to apply in trading?

Trading Rules Explanation

The Stochastic Divergence Indicator connects the peaks and dips of the Stochastic Oscillator as well as its corresponding peaks and dips of the price bars. When divergence is in place, an upward arrow is placed for bullish divergence and a downward arrow for bearish divergence. The best signals come from overbought or oversold price levels. Detailed instructions are provided below.

Buy Signal

Follow these steps for a long trade:

Stochastic Oscillator reaches oversold level (below 20)
Price makes higher low and then lower low and the indicator connect these points with yellow line
Stochastic Divergence connects its recent dips with yellow line and then shows upward blue arrow
Buy trade is triggered after the above conditions are met
Set stop loss a few pips below the last swing low of the market
Take profit or exit trade whenever the price reaches the recent resistance level or use your own method of trade exit

Sell Signal

Follow these steps for a short trade:

Stochastic Oscillator reaches overbought level (above 80)
Price makes lower high and then higher high and the indicator connect these points with yellow line
Stochastic Divergence connects its recent dips with yellow line and then shows downward red arrow
Sell trade is triggered after the above conditions are met
Set stop loss a few pips above the last swing high of the market
Take profit or exit trade whenever the price reaches the recent resistance level or use your own method of trade exit

As always, to achieve good results, remember about proper money management. To be a profitable trader you need to master discipline, emotions, and psychology. It is crucial to know when to trade, but also when not to trade. Avoid trading during unfavorable times and market conditions like low volume/volatility conditions, beyond major sessions, exotic currency pairs, wider spread, etc.

How to set up the Stochastic Divergence indicator in MT4?

Installation Guide

Download the Stochastic Divergence.rar archive at the bottom of this post, unpack it, then copy and paste the Stochastic Divergence.ex4 or Stochastic Divergence.mq4 indicator files into the MQL4 folder of the Metatrader 4 trading platform.

You can gain access to this folder by clicking the top menu options, which goes as follows:

File > Open Data Folder > MQL4 > Indicators (paste here).

Now go to the left side of your MT4 terminal. In the Navigator find the gauge name, right-click it and select Attach to the chart.

Bottom Line

The Stochastic Divergence indicator is well worth adding to your trading collection. A good forex indicator will most probably enhance your chance of success. Nonetheless, remember about having realistic expectations. Just like any other technical analysis tool, is not capable of providing accurate signals 100% of the time. Thus, this forex indicator provides false signals occasionally. Its performance will vary significantly depending on market conditions. Feel free to develop your own trading system based around it. Don’t forget that we still have more great free forex MT4 indicators to download and try.