divergence patterns

[jayjay121]

hi does any trader here trade divergence set ups using price and an indicator or if there is any other ways i would love to know , thankyou?

lately ive notice a few divergence patterns where price goes one way and my indicator goes the opposite and although not perfect, they are quite regular and profitable trades when the correct set up occurs. Patience is the key. Im especially interested in the thoughts of the traders who only use price only.

Have a look at my screenshot, there are a couple of examples.

this is my first year of trading live, so very much still learning so would appreciate the pro's opinions..........Will these divergence patterns continue?, and if so can I reliably add them to my arsenal?, or is it just not viable and im being just lucky?

cheers

 

[fibonelli]

Read this thread

http://www.trade2win.com/boards/technical-analysis/27050-re-entering-trend.html

 

[jayjay121]

cheers........so there are traders out there using divergence in their set ups, thats great i feel more confident now, but why is it then that some traders say indicators are useless?, when clearly they help find powerful repeating patterns like the divergence ones?

 

[jayjay121]

the problem with divergences is that you never know how many to expect prior to the actual trend reversing.....................a quote taken from martin pring.

I guess this is the reason it is not perfect and why people don't like indicators but is anybody using divergence set ups consistently?, surely it can still be a viable method? even if we only take it on percentages

 

[rathcoole_exile]

jayjay,
nkruger is yer man for Divs, if he doesn't spot this thread, give him a nudge .....

 

[jayjay121]

ok nice one

 

[jayjay121]

take alook at these divergence patterns from the trades i just made today, look how powerful they were.........i made money on these trades, can i continue or am i just lucky and the markets will soon change?

 

[evostik]

hi does any trader here trade divergence set ups using price and an indicator or if there is any other ways i would love to know , thankyou?

lately ive notice a few divergence patterns where price goes one way and my indicator goes the opposite and although not perfect, they are quite regular and profitable trades when the correct set up occurs. Patience is the key. Im especially interested in the thoughts of the traders who only use price only.

Have a look at my screenshot, there are a couple of examples.

this is my first year of trading live, so very much still learning so would appreciate the pro's opinions..........Will these divergence patterns continue?, and if so can I reliably add them to my arsenal?, or is it just not viable and im being just lucky?

cheers

Hi JayJay

Thanks for making this post. If you have time (and the inclination, of course), would you mind adding a bit more of an explaination as to what you are 'seeing' in your charts and describing the trade set ups?

Thanks In advance
Seve

 

[jayjay121]

Hi JayJay

Thanks for making this post. If you have time (and the inclination, of course), would you mind adding a bit more of an explaination as to what you are 'seeing' in your charts and describing the trade set ups?

Thanks In advance
Seve

hi evostick, are u familar with divergence?

please read this article by martin pring


I thought there would be more interest in this thread as i feel divergence patterns are worth talking about and imo just as powerful as trader dantes pin bars, well from what im seeing anyway

 

[jayjay121]

[some more examples and also read this excellent article

Trading The MACD Divergence

 

[nkruger]

jayjay,
nkruger is yer man for Divs, if he doesn't spot this thread, give him a nudge .....

I'll consider myself nudged Garry. Thanks for the intro, old chum.

Divergence trading is the mainstay of my working day, and I derive ALL of my income from daytrading, so it is possible to build a profitable trading system/strategy around it.

What you must remember is though, you cannot predict the markets 100% of the time, so if you have a great strategy, its still going to lose some of the time. the trick is to minimize those losses and contain the pips lost.

Divergence will signal (most of the time) a change in direction. If you are using 1 min charts, it will signal a temporary change, or if its 60 min charts, it will signal a better trend change.

Once you see a possible trend change (divergence wth your chosen oscillator) you must then look at the possible high point (for a short) or a low point (for long) and mark it on your chart. Also have a look for lower highs, which also signals a trend change for a short. Read up on trend following (higher highs lower lows etc etc...) as ths will give you clues.

My trading is all done with the morning FTSE. The following example is for a trend change to SHORT. Once I have a possible high (price) when divergence is forming, I will then mark a line at that point and also a line (for entry)at 4 pips lower. Once the price reaches the entry line, I'm in. If it reverses back to the original high price line, I'm out. If not - I then go for the first target.

I watch a 55 tick chart for initial set-ups and then micro manage the trade on a 17 tick.

I Have just tried to upload an image but it's all gone *Pete Tong*

 

[nkruger]

Right, it's worked this time.

Chart shows one of many divergence trades yesterday. I will post a loser as well !!

Any questions ~FIRE AWAY

 

[nkruger]

Here's a screen shot of a failed divergence trade showing trade entry point and price hitting the stop. Interestingly the previous trade (which is marked on the chart) was terminated with profit as the next trade formed a divergence.

Comments please.

 

[jayjay121]

Here's a screen shot of a failed divergence trade showing trade entry point and price hitting the stop. Interestingly the previous trade (which is marked on the chart) was terminated with profit as the next trade formed a divergence.

Comments please.

I put my stops more or less the same place, except i put them 1 tick away from the nearest pivot, but more or less the same.

Yes sometimes like you say it fails and this is where i need some help if its going to be a viable strategy for me. Its fine if in your example it fails on the second leg, im out at the nearest pivot, but what happens when you get 3,4,5 legs before the actual turn?, I guess this is where trendline breaks come into play and making sure the price actually turns first. I was reading an article and some traders find it acceptible to actually average down when there divergence set up fails as they fill its evitable the trend will reverse. Me though feel thats dangerous and think its best to determine first if we are in a strong rally and if we are just simply leave the trade alone or wait for the trendline
break.

I was reading martin prings technical analysis explained yesterday and i love this quote and it is quite true from what i have seen in the markets over the last couple of years.

'In a sense it is possible to equate momentum divergences and price trend breaks with dark clouds and rain. If you look up at the sky and observe dark clouds, common sense tells you it is going to rain, but you don't know for sure until you can hold out your hand and actually feel the rain falling. In other words, the clouds (like the divergences) warn of the deteriorating weather (technical condition), but the change in weather is signaled only only by the first rain drop (reversal in price). It is possible to take the analogy a step further by concluding that the darker the clouds (the greater the number of divergences), the heavier the rainstorm (the sharper the price decline) will be.'

 

[jayjay121]

by the way i notice you are using spreadbet, i use direct access but just wanted to say that you are the second person now that i have seen that does actually make money with spreadbet. You hear so much crap that you can't make it with sb but you and this other guy i know are clearly proving them wrong. Goes to show you that you just can't listening to people and trust what they say, and this is what has set me back in my trading but now i just don't listen, you get to the stage where you just trust yourself and i now do.

 

[jayjay121]

hi nkruger, thanks for the example. Could you take a look at my screenshot to see if ive got your set up right?

Basically if u look at my 144 tick chart, (ignore the 610 tick chart please), you will see the divergence pattern on the price and oscilator. I have marked 2 lines, basically the high (where i will exit if it goes wrong) and the bottom line is my entry, is this the same as your example. I have also put in a trendline for extra confirmation. Can you give your opinion to whether this is an acceptible.

I will now look and post later an example of a failed divergence pattern so you can give your thoughts.

Please open the charts and zoom in on them by clicking them or looking for the icon in the bottom right corner (sorry new to posting charts), look only at the 144 tick chart thanks.

 

[nkruger]

by the way i notice you are using spreadbet, i use direct access but just wanted to say that you are the second person now that i have seen that does actually make money with spreadbet. You hear so much crap that you can't make it with sb but you and this other guy i know are clearly proving them wrong. Goes to show you that you just can't listening to people and trust what they say, and this is what has set me back in my trading but now i just don't listen, you get to the stage where you just trust yourself and i now do.

I've had a few issues over the last year, but I've always had them resolved amicably.

Visit the SB companies you use, meet the staff, ask questions ( as you would if you were getting your car serviced at a garage that you'd never used before ~ common sense )

 

[nkruger]

hi nkruger, thanks for the example. Could you take a look at my screenshot to see if ive got your set up right?

Basically if u look at my 144 tick chart, (ignore the 610 tick chart please), you will see the divergence pattern on the price and oscilator. I have marked 2 lines, basically the high (where i will exit if it goes wrong) and the bottom line is my entry, is this the same as your example. I have also put in a trendline for extra confirmation. Can you give your opinion to whether this is an acceptible.

Look spot on to me. Well done. :clap:

 

[nkruger]

'In a sense it is possible to equate momentum divergences and price trend breaks with dark clouds and rain. If you look up at the sky and observe dark clouds, common sense tells you it is going to rain, but you don't know for sure until you can hold out your hand and actually feel the rain falling. In other words, the clouds (like the divergences) warn of the deteriorating weather (technical condition), but the change in weather is signaled only only by the first rain drop (reversal in price). It is possible to take the analogy a step further by concluding that the darker the clouds (the greater the number of divergences), the heavier the rainstorm (the sharper the price decline) will be.'

So when the clouds just go away without a spot of rain, do you beat yourself up about it or just accept 'that's just the way things go sometimes' ?

 

[jayjay121]

yeah i though that too and funny how pring forgot to add that to his analogy.

But no of course no method is 100%, but if i stick to the exit and entry rule you highlighted, losses will be not so bad, and maybe i can develope some other rules too along the way. One i was thinking of to protect myself was if market is rallying strongly, stay out.....what do u think?, just as i notice that when this happens diveregnce can stay for a long time without reversing........o by the way what do u think of the avergae down idea?