Divergence Traders - When to Enter

Yes, I have seen this in the past and I have made reversal type trades off this type of a pattern during the day and not right in the midst of a news release time period. I also use T&S info for my trades, and If what I was observing in the T&S complimented the candlestick pattern then I would make a trade entry for sure when I see this. This type of pattern is also GREAT for a LONG reversal trade when the main candle bodies (for the two candles red/green) are for the most part below the previous candles low. In other words, they are well below previous candles price action levels (1 pt or more). This is then called by some a "tweezer bottom" type set up for a reversal. The same can be used for a reversal SHORT trade from a "tweezer top".

1046.50 was an area of support I had from price activity at that price level over the past several trade days...nothing special. I think some had pivots at 1047 for this trade day in question...they were right on the money for this day. Hope this helps!

Chris
 
Quote from traderkay:

i think playing momentum divergences on 1min is shady anyway.
More...

The 1m is just for entry based on a higher timframe set up or Support/Resistance.
 
Quote from tradersaavy:

Attached is the 1m ES from 10-31. It of course has my favorite indicators applied, but I am curious where divergence traders would actually enter (assuming you would enter) based on my or your signals. I've put A,B,C,D,E labels to reference general areas.
More...

It's not just a question of where one would enter, but why one would enter there and what one would do with it afterward according to stops, targets, etc.

For example, if one were to enter at the first divergence at A, he might then exit with a timestop when the trade didn't take off. He would then try again at the next divergence at C/D, but might be SO again (both times at BE) a few bars later if he held a tight stop. But even if he'd held it with a wider stop, he'd only get a couple of points out of it, something which experience might have told him would likely be the case, given the tentativeness of the movements.

For myself, I wait for the divergence, then wait for a higher low, then enter at the open of the next bar. But this is within the context of the strategy as a whole. Doing this according to an isolated rule wouldn't make a great deal of sense.
 
Quote from traderkay:

i think playing momentum divergences on 1min is shady anyway.
More...

Wow! How shady? I love playing momentum divergences on a 1 minute chart provided price isn’t trending.

Based on your signal & chart setup, I would have entered once divergence is confirmed. It appears as if MACD divergence confirmation occurs at label A around a price of 1047.50.

I would have managed this trade by setting my initial stop at 1045.50 and then analyzed price action for a good exit. If divergence is still in play, let’s say ten minutes after my entry, I will definitely apply a lot of patience to this trade because my indicators are telling me price will pullback.

How far price will retrace is always undetermined early on! But proper trade management should get you through this trade without significant loss, etc.

Now, my chart setup is a bit different from yours and I would have made the same (Buy) entry once divergence is confirmed. I always try to enter on the first higher low on both indicators after price makes its corresponding lower low because you won’t always get a 2nd higher low. To me, a 2nd higher low on both indicators is incredibly reliable.

Attached you’ll find a chart with my favorite indicators, %D & MACD. Like I mentioned above the entry is the same and if divergence is still in play (2nd higher low on indicators) I would be extremely patient and constantly analyzing a good place to exit.

My goal over the next few months is to learn how to add more contracts and/or reenter immediately upon confirmation of more divergence signals. For myself, this is the most reliable signal especially on a 1-minute chart provided price isn’t trending.
 

Attachments

I stay at the 2 minute chart, that is fast enough for me these days ... I also prefer the CCI as the indicator of choice. The point marked "C" would be the set-up after the diverging CCI at "B". It is more striking (to me) on the 2 min chart.
 

Attachments

About 10 years ago I had the privilege of being tutored by Mr. George Lane, whom many consider to be the authority on Stochastics.

As we were trading one day, we got into a discussion about the entry. Basically, he said...just go.

In other words, I don't wait for a confirmation. If I see a nice double bottom or top forming, I just glance at stochastics. If it looks like it has potential, I just go, and place a 4 or 5 tick stop in.

Now, in his class, he teaches confirmation, by way of a reversal bar. But, this was just between him and I.

Hope this helps...
 

Attachments

You must log in or register to reply here.
Back
Top