Emini divergence journal
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New member, senior trader.
Nice journal, nice and professional guys commenting on it and nice day trading guidance system.
The ADX used as a trend indicator has always been a problem due to the lag Wilder's formula irrefutably introduced. Charles Le Beau did come up with some indications of said lag but I don't remember the details. It is huge.
May I suggest we try to help NPPby experimenting with other trend strength indicators to see if it would improve his trading results.
Last, markets are traded on a 23 hour basis and this morning for example, there was a hige move prior to the opening of the S&P due to Intel's announcement. May be NPP should look at what level the ADX is on a 5 minute Globex S&P chart since no one can discount the price moves generated by news released before the open and after the close... This morning, the 5 min ADX was > 30 on the Globex and there was a divergence in the Chaikin! There was no reason to ignore this situation.
Waiting for comments on this last suggestion.
Nice journal, nice and professional guys commenting on it and nice day trading guidance system.
The ADX used as a trend indicator has always been a problem due to the lag Wilder's formula irrefutably introduced. Charles Le Beau did come up with some indications of said lag but I don't remember the details. It is huge.
May I suggest we try to help NPPby experimenting with other trend strength indicators to see if it would improve his trading results.
Last, markets are traded on a 23 hour basis and this morning for example, there was a hige move prior to the opening of the S&P due to Intel's announcement. May be NPP should look at what level the ADX is on a 5 minute Globex S&P chart since no one can discount the price moves generated by news released before the open and after the close... This morning, the 5 min ADX was > 30 on the Globex and there was a divergence in the Chaikin! There was no reason to ignore this situation.
Waiting for comments on this last suggestion.
He reverted to the DMI when faced with "V" reversals.
Essentially, the ADX would have to be >30. One would then wait for - in the case of a short - the DM- to cross below the DM+. One might have to make more than one attempt to enter, but, in NPP's case, he could also use a confirming indicator (my suggestion, not LeBeau's).
Welcome to ET, jcgcap.
While including the overnight action worked well today, it may also negate otherwise valid entry signals. A sideways action overnight/premarket session due to hesitation or uncertainty approaching or at a S/R level for example, might lower the ADX level from where it ended during RTH the day before, canceling what otherwise would have triggered an entry based only on RTH data. (RTH= 'Regular Trading Hours'). So I guess the only way to tell is to back test and/or compare signals in parallel going forward...
3dog
Magna
Administrator
One solution to the pre-mkt issue is to initially setup with 24hr time, and if there are no compelling moves switch back to "normal" time as the market officially opens at 9:30 EST. But even so, I think there's a serious flaw here, that being the Chaikin is a derivative of volume (actually accumulation/distribution which, in turn, incorporates vol) and the strongest pre-mkt volume pales in comparison to normal volume during the open. So I think you would see alot of so-called "divergences" that are merely a result of this volume discrepancy.
Thanks 3dog. Your point is well taken and I was not suggesting that Globex ADX should take precedence or exclude RTH. I strongly believe in countinuous market - albeit from a price point of view only - and it may be worthwhile for NPP to monitor both.
DbPhoenix, your point is correct but -or +DMI movements can be messy at times. What is the confirming indicator tou have in mind?
DbPhoenix, your point is correct but -or +DMI movements can be messy at times. What is the confirming indicator tou have in mind?
It should be pretty obvious to anyone looking at today's SP chart that it's been a trend down day so far. It's not a rangebound day. If it were to close right now it would form a key reversal on the daily chart. Because of it trending down from the start, I won't be taking any setups using this method for the rest of the day.
When doing my own testing, I've found that the trade is more "sure" if the ADX has begun to roll over. With reference to the DMI, this means that the distance between the + and - have begun to narrow (for the actual cross, one would have to plot them). Since NPP wants to see an attempt at a new high (if long), this rollover is rarely an issue, and can act as a divergence on its own.
NPP, however, also looks for a divergence in an oscillator, in his case, the Chaikin. However, any oscillator ought to serve: RSI, slosto, etc.
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