Divergence Trade Thread

Quote from VisionTrader:



Are you a divergence trader?

Do you use a 24 hour time period when plotting ticks?
More...

I am a divergence trader of sorts. I used a divergence system in the past and didn't do very well, so currently I am trading support and resistance. However, I have been following your posts about divergence and am interested in revisiting that method of trading.
(It may be that my problems with divergence trading in the past had more to do with my own tading ability rather than the system itself.)

Yes, on the tick charts I always use the 24 hour data. The night-time action is usuallly compressed into relatively few bars.

Cheer,

kp
 
I think one of the main problems we've all seen regarding divergence trading is identifying whether we're in an overall trending environment on a larger timeframe. I'll post some of the methods I've learned to look at trends within the next day or so, but we really need to have that as an important part of the dialog.

T-REX, I'll PM you to talk about the file formats :)
 
Quote from MarkB:

I think one of the main problems we've all seen regarding divergence trading is identifying whether we're in an overall trending environment on a larger timeframe. I'll post some of the methods I've learned to look at trends within the next day or so, but we really need to have that as an important part of the dialog.

T-REX, I'll PM you to talk about the file formats :)
More...

Mark - You make a good point. It is tough. For me it is combination of things, including the proverbial gut feel. This may be considered a disadvantage to being a divergence only trader, however, there are also many advantages.

My advice to all is that when you feel we are trending, have an alternate system to trade or just sit the day out. Today is a tough call for me so far. Although it is a down day, it is not screaming at me so far. I am going with my signals until I get bruised up a little.

I have longer term bullish divergence right now, although I am certainly skeptical of this.

Good point.
 
Here's some observations I have made trading 5m charts with divergence.

This may be very basic, but it is a valuable guide for my trading.

A 5m chart double top/bottom could be the beginning of a countertrend pullback in a larger timeframe thus trading against the trend.
or
It could be the end of a pullback in a larger timeframe which is hitting support or resistance creating a 1) continuation trade with the larger timeframe trend 2) Buying/Selling at Support/Resistance and
3) a divergence set up

There aren't as many trades, but I try to find only the latter of the two descriptions above as they move more and have a higher winning %.

Also, a 5m double top/bottom combined with a 30m/60m double top/bottom is great. I post some charts later.
 
Okay...I am a little behind here. I am going to have to post this later tonight. I have to be at a meeting in a few minutes.

I will document why I entered and where I exited. I will try to document some of my thoughts during the trade also.

I can't believe how low the volume is today. Is it Labor Day?
 
Quote from tradersaavy:

Here's some observations I have made trading 5m charts with divergence.

This may be very basic, but it is a valuable guide for my trading.

A 5m chart double top/bottom could be the beginning of a countertrend pullback in a larger timeframe thus trading against the trend.
or
It could be the end of a pullback in a larger timeframe which is hitting support or resistance creating a 1) continuation trade with the larger timeframe trend 2) Buying/Selling at Support/Resistance and
3) a divergence set up

There aren't as many trades, but I try to find only the latter of the two descriptions above as they move more and have a higher winning %.

Also, a 5m double top/bottom combined with a 30m/60m double top/bottom is great. I post some charts later.
More...



Good points TS. You will find that I try to predict the weather over a short time frame. I can be more accurate this way. In my area, there are always thunderstorms lurking on the horizon that you have no idea are going to develop. Ask me what the weather will be like in the next hour or so and I can be fairly accurate as a weatherman. Ask me to do a 5 day forecast or a forecast for the whole day and I have to reach for the Farmers Almanc.

Trade in the now. Carry an umbrella.
 
While I am away, I wanted to provoke some discussion on the ADX. I am not an overly educated man, especially when it comes to indicators.

I have read with interest some of the discussions on the ADX indicator in the various threads here. When the ADX is moving up 30/40 whatever this means a trend is strong or developing with vigor. (possibly reversing certainly).

My question is "Why would I want price trending (frenzied, greed, fear) when I am trading in a controlled divergence based environment??

When I look back at my charts, my method performs better when the ADX is low (in general). With divergence you want things calm in my opinion. I am not sold on the value of this indicator with my divergence method.

Just some food for thought. Have at me but be nice.
 
With my retirement account I trade divergence reversals almost exclusively. (weekly and daily timeframes)

I do a scan for stocks with 35 or above on the ADX, as well as other parameters not relevant to this discussion, because I want a trend in place that the stock can reverse from. To me, the plus 30 does not mean a trend is tiring, it mean that the trend is established. From there traders can do what they wish.
 
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