MACD and PRICE divergence

[dbphoenix]

Quote from tradersaavy:

Someone mentioned using divergence on a timeframe less than 5m not working. I use it on a 1m and it works for me.

Also, I think it was Ditch that said something about divergence trading being a road to the poorhouse.
Again, it works for me.

I suspect that those who say that these divergences "don't work" don't understand how the MACD is constructed (whether or not this applies to Ditch, I have no idea).

For example, the histogram measures the distance between the two lines. If the price is trending, those two lines will come closer together, not farther apart. Therefore, the histogram will show a "divergence" where there is none. So one has to relate what price is doing to what the MACD is showing. Otherwise, the MACD will present a false picture.

Of course, one could just focus on price, but a lot of people apparently don't understand what they're looking at, so they rely on indicators to translate for them. Unfortunately, most indicators never made it past the third grade.

 

[TSOKAKIS]

Quote from TSOKAKIS:

Here is my AFL code for MACD-Price divergence.
Excellent entries/exits when available.
The combination with the respective Stochadtic Divergene is true gold for Crude Oil futures.

//MACD-Price divergence, by D. Tsokakis
ST33=MACD();bars=100;d=5;
TR1=LLVBars(ST33,d);
COND1=TR1>0 AND Ref(TR1,-1)==0 AND Ref(ST33,-1)<0;
TR2=IIf(COND1,Ref(ST33,-1),0);
Plot(st33,"MACD",1,8);
M1=ValueWhen(COND1,ST33);
P1=ValueWhen(COND1,LLV(L,3));
DM1=M1-Ref(M1,-1);DP1=P1-Ref(P1,-1);
DT=Ref(BarsSince(COND1),-1);
POSDIV=DM1>0 AND DP1<0 AND DT<BARS;
Plot(POSDIV*LastValue(Lowest(ST33)),"",5,2);
TR11=HHVBars(ST33,d);
COND11=TR11>0 AND Ref(TR11,-1)==0 AND Ref(ST33,-1)>0;
TR21=IIf(COND11,Ref(ST33,-1),0);
M11=ValueWhen(COND11,ST33);
P11=ValueWhen(COND11,HHV(H,3));
DM11=M11-Ref(M11,-1);DP11=P11-Ref(P11,-1);
DT1=Ref(BarsSince(COND11),-1);
NEGDIV=DM11<0 AND DP11>0 AND DT1<BARS;
Plot(NEGDIV*LastValue(Highest(ST33)),"",4,2);
GraphXSpace=5;

A clear Sell/Short signal for CLZ04 was confirmed by June2 session. Since the markets were confused about OPEC decisions etc, there were opportunities to Short even the next bar, when the prices gave the [tricky and wrong] bullish impression .

 

[murray t turtle]

Quote from dbphoenix:



Of course, one could just focus on price, but a lot of people apparently don't understand what they're looking at, so they rely on indicators to translate for them. Unfortunately, most indicators never made it past the third grade. [/B]

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Like plans including recording in writing;
price,
moving averages , occasional CD[certificate /deposit]
mr Price in BIG TRENDS;
but still watch out for errors in moving averages or errors in price data.

Like open price & db-phoenix quote ''prev days days high, low, close''


The plans of the diligent tend only to advantage.
Solomon, trader king.