Can someone share his opinion on divergence?

[EDWINGENTNER]

Can someone share his opinion on divergence? And also what about hidden divergence? Which one indicator is the best?

 

[tomorton]

Divergence, like all indicators and indicator scenarios work sometimes. And sometimes they don't.

The reason for their unreliability is that they lag the market price action, they don't predict it. Think about it - its the big players who move price, agreed? But they're not going to move price down because they see the hidden negative divergence that you might see, they are already moving prices up against the indicator trend that then forms the negative divergence.

So the indicator is not a predictor of what price will do, but it can be a useful predictor of what you might do.


If we're unlucky, there will now follow a series of posts that RSI is better than MACD and MACD is better than stochastics and on and on. Truth is, its traders who make good indicators, not indicators who make good traders.

 

[mitch mconal]

Divergences are easy to identify after they happen on historical charts because you can see where price eventually went. Yeah, there's one, there's another and another! All made $!

However, the ones you don't see are those that occurred but failed to produce a profit. These are hidden in the candles but would have been taken in realtime for a loss.

 

[EDWINGENTNER]

Divergence, like all indicators and indicator scenarios work sometimes. And sometimes they don't.

The reason for their unreliability is that they lag the market price action, they don't predict it. Think about it - its the big players who move price, agreed? But they're not going to move price down because they see the hidden negative divergence that you might see, they are already moving prices up against the indicator trend that then forms the negative divergence.

So the indicator is not a predictor of what price will do, but it can be a useful predictor of what you might do.


If we're unlucky, there will now follow a series of posts that RSI is better than MACD and MACD is better than stochastics and on and on. Truth is, its traders who make good indicators, not indicators who make good traders.

I am agree with you. Some time ago I used combinations of several indicators and made some profit, then I provided my strategy to my friend and he had no luck.

 

[TradeTrading]

The hidden divergence is similar to the "standard" divergence - where the price of the asset and the indicator move in opposite directions.

However, while regular divergence may warn you prematurely of a possible upturn or change in price direction, a hidden divergence may tell you before the time that the trend seems to continue.

 

[Splitlink]

Divergence, like all indicators and indicator scenarios work sometimes. And sometimes they don't.

The reason for their unreliability is that they lag the market price action, they don't predict it. Think about it - its the big players who move price, agreed? But they're not going to move price down because they see the hidden negative divergence that you might see, they are already moving prices up against the indicator trend that then forms the negative divergence.

So the indicator is not a predictor of what price will do, but it can be a useful predictor of what you might do.


If we're unlucky, there will now follow a series of posts that RSI is better than MACD and MACD is better than stochastics and on and on. Truth is, its traders who make good indicators, not indicators who make good traders.

Thanks for that, Tom. I had not used divergence and, now, I'm not going to.

 

[Earthling]

I agree with all the postings so far.

My opinion is that divergence and hidden divergence are methods that cant be used on their own. Like Mitch mconal points out, they are everywhere, not just at trade-able turning points.

But they can be used as one of the factors that is stacked up to try to find something unique about places where price does something profitably predictable.

I don't use divergence any more, because it got too complex with all the layering of other factors I found necesarry.

There's some brilliant info on divergences in the "DTS Methodology" pdf on post 1 of this thread http://www.trade2win.com/boards/forex/42158-comprehensive-trading-system-methodology.html

This guy was amazingly generous. Its his "point 3" of 4 points in that PDF.

 

[foroom lluzers]

If you know how and when to trade , using patience and at support and resistance, divergence or reading the stochastic 28/6/10 will give good results on 1 hour plus charts.

 

[foroom lluzers]

Divergence, like all indicators and indicator scenarios work sometimes. And sometimes they don't.

The reason for their unreliability is that they lag the market price action, they don't predict it. Think about it - its the big players who move price, agreed? But they're not going to move price down because they see the hidden negative divergence that you might see, they are already moving prices up against the indicator trend that then forms the negative divergence.

So the indicator is not a predictor of what price will do, but it can be a useful predictor of what you might do.


If we're unlucky, there will now follow a series of posts that RSI is better than MACD and MACD is better than stochastics and on and on. Truth is, its traders who make good indicators, not indicators who make good traders.

Gotta know when they work , when using very high probability systems.

 

[darktone]

 

[Dr. Toad]

If you know how and when to trade , using patience and at support and resistance, divergence or reading the stochastic 28/6/10 will give good results on 1 hour plus charts.

I don't use indicators other than occasionally coding a moving average into one of my systems to attempt to provide a moving stop of some variety (never ends up working well for me), so perhaps I am off base with my comment...but... Isn't the whole point of using indicators generally to help traders determine when good entry and exit points are?

So basically what you are saying is that as long as you don't need indicators to trade ("you know how and when to trade"), you can use indicators to trade successfully ("divergence or reading the stochastic 28/6/10 will give good results"). Hmm...I think darktone summed this one up nicely.

I am very interested in seeing some verification of the wisdom you are imparting unto us. I really haven't seen any proper analysis you have done from the countless nuggets you have provided us with. Could you please provide a link to one of your numerous threads which contains some rigorous verification of one of your systems? Not simply telling entries and exits for a handful of trades, but actual, statistically significant verification.

I am sure your vast experience helps you simply know these things as facts, but I believe those of us less fortunate than you would like to see some proper validation. Surely you have done this and are not simply, as some might say, "the blind leading the blind"?

 

[foroom lluzers]

A trader does not need indicators , he can just look at candles for supports and resistances.

 

[foroom lluzers]

Divergence, like all indicators and indicator scenarios work sometimes. And sometimes they don't.

The reason for their unreliability is that they lag the market price action, they don't predict it. Think about it - its the big players who move price, agreed? But they're not going to move price down because they see the hidden negative divergence that you might see, they are already moving prices up against the indicator trend that then forms the negative divergence.

So the indicator is not a predictor of what price will do, but it can be a useful predictor of what you might do.


If we're unlucky, there will now follow a series of posts that RSI is better than MACD and MACD is better than stochastics and on and on. Truth is, its traders who make good indicators, not indicators who make good traders.

If you look at these support areas , it is a good place to look for divergence long trades.

 

[sicktrader7]

I use price / volume divergeance at times. if I'm trying get a bottom reversaI I'm looking to see if volume is increasing as price is falling but candle spreads are narrowing. Same for a top reversal if I'm looking to short. I'd just draw it on manually.

 

[no stops trader]

Can someone share his opinion on divergence? And also what about hidden divergence? Which one indicator is the best?

I believe it's a movie set in the future when the state is socialist and the citizens not allowed private lives... something like a whole nation of trader