The Stochastic Divergence indicator for Metatrader 4 identifies bullish & bearish divergences between price and the Stochastic indicator.
Divergences are a powerful tool that can help to detect early trend reversals on any time frame.
The indicator appears in a separate MT4 chart window in the form of buy/sell signal arrows + divergence lines.
Buy & Sell Trade Example
- A blue arrow is a buy signal (bullish divergence).
- A red arrow is a sell signal (bearish divergence).
The indicator is very reliable, lightweight, and will not slow down your trading platform.
It works on all MT4 trading instruments.
Free Download
Download the “Stochastic Divergence.mq4” indicator for MT4
Indicator Chart (EUR/USD H1)
The picture below shows the Stochastic Divergence mt4 indicator in action on the trading chart.
Trading Tips:
Utilize your own favorite trade entry, stop loss and take profit method when trading with the Stochastic Divergence indicator.
As always, trade in agreement with the overall trend and practice on a demo account first until you fully understand this indicator.
Please note that even the best trading indicator cannot yield a 100% win rate over long periods.
Indicator Specifications & Inputs:
Trading Platform: Developed for Metatrader 4 (MT4)
Currency pairs: Works for any pair
Time frames: Works for any time frame
Input Parameters: Variable (inputs tab), color settings & style
Indicator type: Divergence
Repaint? No.
Stochastic Divergence + Zero Lag Moving Average MT4 Scalping Strategy
The combination of the Stochastic Divergence Indicator for MT4 and the Zero Lag Moving Average Indicator for MT4 provides a fast and accurate scalping approach.
It’s ideal for traders who prefer clear entries and minimal lag.
This setup is suitable for both beginners and experienced traders who prefer shorter time frames, such as M5 or M15 charts.
It works best during active market sessions, such as those in London or New York, where price movements are sharper and more predictable.
The Stochastic Divergence indicator detects early reversal points by spotting divergences between price and the stochastic oscillator.
A blue arrow signals a bullish divergence, indicating a potential upward reversal, while a red arrow highlights a bearish divergence, suggesting a possible downward move.
The Zero Lag Moving Average complements it by confirming the trend direction.
When its histogram is above zero, the market is in a buy phase; when it’s below zero, the market is bearish.
Together, they form a clear and reliable scalping system with minimal lag and early warning signals.
Buy Entry Rules
- Wait for a blue arrow to appear on the Stochastic Divergence indicator (bullish divergence).
- Confirm that the Zero Lag Moving Average histogram is above the zero line.
- Open a buy trade at the close of the confirmation candle.
- Place a stop loss just below the recent swing low or 10 pips lower for tighter control.
- Set a take profit target of 15–40 pips, or exit when the histogram crosses back below zero.
Sell Entry Rules
- Wait for a red arrow on the Stochastic Divergence indicator (bearish divergence).
- Confirm that the Zero Lag Moving Average histogram is below the zero line.
- Open a sell position after the signal candle closes.
- Set a stop loss just above the recent swing high or around 10 pips higher.
- Take profit at 15–40 pips, or close the position when the histogram crosses above zero.
Advantages
- Combines divergence and trend confirmation for higher accuracy.
- Provides early entry signals before trend reversals fully develop.
- Low lag and fast signal confirmation thanks to the Zero Lag MA.
- Suitable for all major currency pairs and volatile cross pairs.
- Ideal for intraday and scalping setups with clear visual cues.
Drawbacks
- The divergence signal can appear too early, causing entries before the trend has fully reversed.
- Performance may vary across different pairs and time frames, requiring optimization and testing.
- The Zero Lag Moving Average can still react to sudden spikes, leading to whipsaws in volatile markets.
- The strategy may produce small profits per trade, so a strong risk-to-reward discipline is essential.
Example Case Study 1 – GBPJPY M15
On the GBPJPY M15 chart, a blue arrow appeared near the 190.60 level after a series of lower lows, while the stochastic showed a bullish divergence.
The Zero Lag Moving Average histogram is confirmed by crossing above zero.
A buy trade was entered at 190.75 with a 15-pip stop loss and a 35-pip target.
Within an hour, the price moved up steadily to 191.10, delivering a 35-pip gain.
The histogram stayed above zero throughout, confirming the short-term bullish momentum.
Example Case Study 2 – USDCHF M5
On the USDCHF M5 chart, a red arrow appeared near the 0.9180 resistance area, signaling a bearish divergence.
At the same time, the Zero Lag Moving Average histogram turned below zero, confirming bearish pressure.
A sell trade was opened at 0.9175, with a 10-pip stop loss and a 25-pip take profit.
The pair dropped quickly to 0.9150 within 40 minutes, yielding a clean 25-pip profit.
This setup demonstrated how the strategy captures short but reliable scalping moves during strong sessions.
Strategy Tips
- Focus on the most active sessions (London and New York) for better volatility and clearer divergence signals.
- Use trailing stops after a 20-pip gain to lock in profits during extended moves.
- Combine a higher time frame analysis (H1) to confirm the general trend direction before scalping.
This Stochastic Divergence and Zero Lag Moving Average MT4 strategy provides a well-balanced approach to short-term trading.
It combines early reversal detection with fast trend confirmation, helping traders capture clean scalping opportunities with controlled risk and consistent results.
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Download the “Stochastic Divergence.mq4” indicator for Metatrader 4
