divergence patterns

[rathcoole_exile]

hi everybody,this is my first post on this thread,(still reading it.)what interests me most is the fact that divergences(??is there such a word??)are being used as entry signals parse?i often use divergences for CONFIMATION/CONFLUENCE and are great signals but have not concidered entering possitionsonly using divergence as my only signal.please correct me someyone!!
anyway here is the last divergence which helped me into a winning trade.

what about the earlier divergence, the one from late on the 12 to early on 13th, that led to the Short opportunity ?

 

[fibonelli]

Attached is a daily chart of Kinross showing the two main types of divergences and indicator patterns using two SMI indicators that occurred during the strong uptrend and corrective (?) downtrend.

The bottom indicator is 4x the bar length of the one above it.

jonj - i agree that divergences are best used in a filtered manner with extensive TA. For example, I would not take a bullish regular divergence signal just below monster resistance, a million miles from support, with bearish price action and bearish looking candlesticks!

jayjay121 - If you want to see more divergences, just reduce the bar length of your oscillator. Having said that you'll end up with a headache deciding which ones to trade and which ones to leave well alone.

Less is more.

 

[nkruger]

Just noticed, this is the most read thread in the FAQ section.

Big hand to all you guys who have contributed with very worthwhile comments and ideas.

Lots of stuff here for newbies to get there teeth into.

 

[jayjay121]

Attached is a daily chart of Kinross showing the two main types of divergences and indicator patterns using two SMI indicators that occurred during the strong uptrend and corrective (?) downtrend.

The bottom indicator is 4x the bar length of the one above it.

jonj - i agree that divergences are best used in a filtered manner with extensive TA. For example, I would not take a bullish regular divergence signal just below monster resistance, a million miles from support, with bearish price action and bearish looking candlesticks!

jayjay121 - If you want to see more divergences, just reduce the bar length of your oscillator. Having said that you'll end up with a headache deciding which ones to trade and which ones to leave well alone.

Less is more.

yes im the same, i always check s and r before i enter and also i make sure my trendline is broken then i enter, I also just added a new rule over the weekend from things i noticed in testing and also stolen abit of it from nkruger's idea that if it breaks my trendline i will only enter if stop is no further than 5 ticks alway, so my new max stop is 5 ticks, i always put my stop 1 tick up or down from candles closed pivot, ignoring the spikes, my stop was too big before..................basically i always make sure there is enough room in the trade, nothings perfect but this is a good method..........I also do not want to overwhelm my brain at the beginning so i only taking regular divergence trades as i posted.

thanks for the ideas guys and keep them coming.


So far testing over 3 days is profitable trading only 3 hours per day using the above
method, but when you add commision not as profitable as i would like........................is this kind of testing a waste of time?, or does it help, i personally think it improves things, things i had not noticed before.......like for example im now testing those 3 days for profit targets i can safely achieve and also a new stop idea from ceydababy that when trade goes in your favour but turns back to zero i will exit. Testing is good but obviously not guaranteed.

Im using 2 contracts and i want a net daily goal of $200 a day, is this too much?, i feel it might be, but if and when i trade this full time the idea is to go for $400 a day using 4-6 contracts thats it this will not change as this is all i need a day to live comfortable, i will not get greedy and like nkruger i want to trade for more freedom in my life. Guys let me know honestly if the above figures are not realistic as this will obviously affect my testing. thanks.

Another rule is from nkruger, and that i will stop trading if i have 4 consec losers.

i will post my results later once i have chosen and finalized my rules, testing is going to be long to make sure i give myself the best possible chance of course so this could be some time.

 

[jonj]

[

QUOTE=jayjay121;434624]yes im the same, i always check s and r before i enter and also i make sure my trendline is broken then i enter, I also just added a new rule over the weekend from things i noticed in testing and also stolen abit of it from nkruger's idea that if it breaks my trendline i will only enter if stop is no further than 5 ticks alway, so my new max stop is 5 ticks, i always put my stop 1 tick up or down from candles closed pivot, ignoring the spikes, my stop was too big before..................basically i always make sure there is enough room in the trade, nothings perfect but this is a good method..........I also do not want to overwhelm my brain at the beginning so i only taking regular divergence trades as i posted.

do you have a method for setting your targets,e.g.do you have set limt or do you trade to the next pivot??

thanks for the ideas guys and keep them coming.


So far testing over 3 days is profitable trading only 3 hours per day using the above
method, but when you add commision not as profitable as i would like........................is this kind of testing a waste of time?, or does it help, i personally think it improves things, things i had not noticed before.......like for example im now testing those 3 days for profit targets i can safely achieve and also a new stop idea from ceydababy that when trade goes in your favour but turns back to zero i will exit. Testing is good but obviously not guaranteed.

in my experience(limited)back testing pattern breaks(flags etc)not only helped give me a good feel for these type of trades but gives me hard data to help plan my trade.e.g one thing that suprised me was the fact that standard stops for these types of trades were way unnessesary(too high)my data(subjective)showed that almost all the breaks moved enough INITIALY to utilize very tight stops as the initial break would give the trade room to breath in itself,putting a BE stop after 30-40pips means that the initial stop could be as low as 5-10 pips from the break price!!so for me it DEFENATLY helped

Im using 2 contracts and i want a net daily goal of $200 a day, is this too much?, i feel it might be, but if and when i trade this full time the idea is to go for $400 a day using 4-6 contracts thats it this will not change as this is all i need a day to live comfortable, i will not get greedy and like nkruger i want to trade for more freedom in my life. Guys let me know honestly if the above figures are not realistic as this will obviously affect my testing. thanks.

i only trade demos at the mo and realistic targets is an issue with me also,but 2 contract and 200 bucks means only 10 pips on ave. yes?this to me is about my idea also and to me seams realistic??

Another rule is from nkruger, and that i will stop trading if i have 4 consec losers.

i will post my results later once i have chosen and finalized my rules, testing is going to be long to make sure i give myself the best possible chance of course so this could be some time.[/QUOTE]

p.s. the earlier divergence would have been a good trade also ,must have been somwhere else
good luck with your trading and keep up the good work

 

[jonj]

heres one im looking at now,gonna buy the break above the previous candle(the 5min shows a double top/tweezer wich looks promising)hope to snatch 10 pips or so.this is not a trade i would take with money its more just forward testing,not too sure how it will turn out.

 

[jonj]

well there you are!!these divergencies really really work
closed for +14.could mabye have entered on the stoch/price bounce ??but i like to see a lttle momentum especially in a tight range like this morn.

 

[jayjay121]

well there you are!!these divergencies really really work
closed for +14.could mabye have entered on the stoch/price bounce ??but i like to see a lttle momentum especially in a tight range like this morn.

yes they work thats for sure, but its just the planning and money management, i must get this right.

At present i only trade er2, and i only start my trading at 2.40pm every day..........but looking to possibly start trading the dax or ftse but i just love the er2 i gotta admit.

 

[rathcoole_exile]

but i just love the er2 i gotta admit.

never having trading it, may I ask why you're such a big fan ?
maybe I should take a peek at it ?

 

[jonj]

yes they work thats for sure, but its just the planning and money management, i must get this right.

At present i only trade er2, and i only start my trading at 2.40pm every day..........but looking to possibly start trading the dax or ftse but i just love the er2 i gotta admit.

having never heard of it i have to ask...whats er2:?:

 

[fifty2aces]

having never heard of it i have to ask...whats er2:?:

Futures contract for the Russell 2000 US stock index. Just like the YM, ES, NQ...

 

[jonj]

Futures contract for the Russell 2000 US stock index. Just like the YM, ES, NQ...

thanx,just fx so far for me.

 

[jayjay121]

i like it i guess because it moves basically, it's seems alot faster and much more volatile compared to others (some traders would hate that its more volatile) and with this in mind i can get more bang for my bucks especailly as i scalp

 

[rathcoole_exile]

want to share 2 beautiful examples from ES from yesterday.
I only managed to get trade number 1 (from 1437 to 1430) :clap:

but I was in bed for trade nr 2 (I'm 12 hours ahead of US Makrkets)

still, nice examples i think ......

 

[bansir]

want to share 2 beautiful examples from ES from yesterday.
I only managed to get trade number 1 (from 1437 to 1430) :clap:

but I was in bed for trade nr 2 (I'm 12 hours ahead of US Makrkets)

still, nice examples i think ......

Hi Rathcoole,
Nice examples.
I like entry 1 better, I guess you wait a bit for the price to break the recent lows and to leave a well defined third peak.
Did you trail your stop for the exit?

To me, it takes a lot of belief in the indicator to contemplate a long at 2.
I would be too wary of a continuation.

Best Regards,
Neil

PS Great thread JayJay

 

[rathcoole_exile]

To me, it takes a lot of belief in the indicator to contemplate a long at 2.
I would be too wary of a continuation.

Neil, you may be right, but luckily I was asleep so didn't have to make the decision.

But as Nick Kruger suggests, you have to take every trade that presents itself, without "thinking" too much about it.

In many ways trade 2 was the better, as it was in the direction of the main underlying trend ........

 

[rathcoole_exile]

Hi Rathcoole,
Nice examples.
I like entry 1 better, I guess you wait a bit for the price to break the recent lows and to leave a well defined third peak.
Did you trail your stop for the exit?

Neil,
yes, the trigger was actually a SellStop, I rarely enter at the Market
initial 6 points SL
scale out lot 1 at 2 points profit
bring SL to b/e-2
scale out lot 2 at 4 points profit
bring SL to b/e
normally I would let lot 3 run until I got an exit signal, but as i was going to bed, I just set a target based on previous resistance/round number

garry

 

[jonj]

want to share 2 beautiful examples from ES from yesterday.
I only managed to get trade number 1 (from 1437 to 1430) :clap:

but I was in bed for trade nr 2 (I'm 12 hours ahead of US Makrkets)

still, nice examples i think ......

hi there rathcoole,just wondering what your thoughts are about the macd divergence on the first e.g.On the last peak in price with e.g. 1,the macd hist shows blue/+ does that bother you when entering a trade like this,im not sure how to interpret it??mabye you could help:confusedthanx

 

[rathcoole_exile]

hi there rathcoole,just wondering what your thoughts are about the macd divergence on the first e.g.On the last peak in price with e.g. 1,the macd hist shows blue/+ does that bother you when entering a trade like this,im not sure how to interpret it??mabye you could help:confusedthanx

to be honest it wouldn't do, as long as it was moving in the right direction and confirming divergence.
However, on this trade, once the peaks had established and the MACD was in divergence, I just set a SellStop just below to catch a break. By that time MACD was already in the red.
Most people who know me know that I usually use Stops to Buy & Sell, rarely at Market or with Limit entries.
I'm a big believer i having Momentum on my side and happily give up a few points at the start of a move until i can establish a break is on.

(By the way, I'm not married to MACD, in fact I often prefer RSI and/or CCI.
I'm even playing around with inertia, which seems so far to be the best of the lot for establishing divergence. I was using MACD last night as I'm keen to understand why Nick is so devoted to it) Having said that, another couple of 7 point moves on the ES and I'll be the biggest fan of MACD :cheesy:

 

[nkruger]

It is a custom MACD that I've used for over a year now, so I'm very used to its 'personality'

That's the basis of my devotion Garry....... :cheesy: