Is anyone using Divergence successfully?
- Thread starter MarketAddict
- Start date
:eek:All wrong.......
Overlay a 60-minute swing low / swing high onto a "5-minute chart". You do NOT want the 60-minute swing low / high to have been hit prior to prices moving into the area. In other words, prices have not come back to test the level since it was formed. Hint: Higher Timeframes should be even more powerful (120-min swing turning points, Daily turning points are money in the bank).
Look for Levels formed by swing points with at least 8 bars on each side of higher lows for longs or lower highs for shorts - i.e., 8-bar strength for the pivot
Next, look for divergence patterns as prices are moving into the levels. Also, combining some price patterns as CrazyA says may help as well (ex., three drives, etc). Test this and report back......
note: it will require a lot of searching.....
You need more backtesting results beyond the weeks that you've mentioned especially because you want to see how your trade signal performs with your divergence pattern in different types of market conditions.
Therefore, although you're manually backtesting, you need stats going back a few years and this will help give you that "being able to read price action".
Further, although you didn't mention what type of stats you're keeping...make sure you save (download) charts of every trade signal (winner and loser) that you see in those divergence price action. It'll give you excellent feedback about your trade signal, divergence going forward.
Another way to look at it, you're not even close to being ready to trade divergence until you have done the proper backtesting.
I agree. And I am in the process of doing more bactesting
Are you looking the chart or are you trading your beliefs? Because last time I checked the chart is always right. That 60 min chart produced over 100 pips. Just because you don't draw your lines that way doesn't mean it's wrong.
There is nothing to argue about, divergence is as good as random.
These indicators are not systems... they're ways to technically gauge the market beyond candle sticks and volume charts.
Divergences are one of the most useful ways to use the two indicators you listed, and many more. They give a strong technical foundation to what will probably happen down the road. They can be used in 5 minute time frames, or even daily charts.
Writing code that would properly interpret each of these indicators would be very complicated... a finished compiled program would take one guy at least a few days full time. These indicators are "raw" standard indicators that are designed for discretionary trading.
Read more on the MACD, RSI, MFI, Accumulation / Distribution, CMO, CMF, VROC, TSI and others at chartschool, investopedia and wikipedia. These indicators are just the beginning of ways to read the market, as well as other algorithms that can be used as part of system building. Ninjatrader has the most 'standard indicators' built in (around 100-200).
LOL! I'll tell you what, lets make a bet. You place your long orders, and I'll sell them to you over the exchange on the short side. We'll meet again on the 1st and see who wins.
You should also pull up contracts from last quarter and in 2010 (do this from now on too, two weeks of semiobjective data is like sampling public opinion on seniors by asking five high school students). I think I know what you're talking about... there has been HUGE divergence for the past two weeks with no real kicker selloff yet. The selloffs are there, they're just small. What's really brewing is not disfunctioning indicators, but a huge bearish flag that's been going on for almost two weeks now. I've been talking about this in the ES journal thread and a few other places, search my posts if you'd like to check it out.