Oppurtune Divergence System

Visit my old system page here: http://www.forexfactory.com/showthread.php?t=283319

All the rules are the same with that system except for the new trailing rules:

You have to wait for 2-3 strong/weak candles if buying/selling (strong if long, weak if short), strong bars are candles which open in the bottom third of its range and close in the top third (reverse for a weak bar) before trailing at the strong/weak candles. Also if your stop is not at breakeven (once price has traveled 1 ATR from your entry it is moved to breakeven now) you can't trail at fractals until there are at least 2.

To summarize the old system with the new rules that increase performance are as follows:
1) Can't trail stop at fractals until stop moved to breakeven or 2 fractals exist
2) Can't trail stop anytime at strong/weak bars until two are present not counting the signal bar





Now to start the new system which uses price action S/R, pivot points and a few classic indicators to make you more money on your divergences.


I truly don't care about trend when trading divergences sometimes when trading a 4h divergence it is with the daily trend at other times it is not it just all depends. TREND has no barring on trades with this system.

The indicators you need for this system are:

1) Candles
2) Bollinger bands with default 20,2 settings
3) Stochastic set to 15,5,5 smoothed with an ema (regular ma is fine too its just slower)
4) MACD set to default 12,26,9 settings




The rules for buy entries are as follows (reverse for sells):

1) Price must hit and respond (close above ) one of the following items:
1) Daily Trendline or horizontal support
2) Daily Fib extensions
3) If none of these exist it must respond to a coagulation between daily/weekly/monthly pivots, a coagulation is an area of at least two pivot points and S1,R1,S2,R2 points and pivots from two of the time frames, for instance daily s1 and weekly s2 may be within 10 pips of each other, this is a coagulation and is an extreme support resistance level. Take profits can also be stuck at these levels

2) Either MACD and/or Stochastic must be showing a possibility of divergence (if they turned there would be a divergence) AND price must have touched a bollinger band within the last 1-3 candles.

3) This is the actual signal, once the previous items are fulfilled you must wait for at least a 1 point turn in stochastic %k not %d. Also a japanese candlestick must accompany it. Scroll down a few time frames lower and spot an entry between the signal bar's close (of your main time frame) and the 50% level of the signal candle (the candle when stoch %k turns), this entry is usually just with forex wisdom i.e. bullish divergence on lower time frame and you want to sell the higher timeframe therefore you go closer to 50% than to a aggressive entry at the signal bar close.


4) Stops are originally placed 5 pips below/above the signal bar. Stops are moved to breakeven after any candle hits middle bollinger ma (only if the signal candle didn't cross the ma, if this happened stops are moved to breakeven after it hits the opposite bollinger band)

5) Stops are trailed at strong/weak bars (discussed above) after at least 2 of them form

6) Stops are also trailed at fractals (look it up if you don't know it) once they are moved to breakeven (or two fractals form before breakeven move.

7) Take profits are placed at pivot coagulations, or if you wan't the big bucks don't take profits just ride the price waves.

8) No and I repeat NO taking half of your positions off, it may seem like a good idea but I've run the math and statistically with past performance in the worst months on record, its better to double your gains and losses by trading double lot size than taking half the position off.



Don't worry it can summarized in steps:

1) Price must hit Daily/Weekly S/R or pivot coagulation
2) Price must also pierce a bollinger band and MACD and Stoch must be in a position to diverge
3) Wait for stoch %k to turn 1 point at least and then enter between 0-50% retracement of the signal candle (its all up to you)
4) Place stop 5 pips above/below signal candle
5) Place Limit at next pivot coagulation or significant weekly support/resistance
6) Stops automatically moved to breakeven after a candle hits middle bollinger band (if signal candle didn't close above it, talking a long trade) or the opposite bollinger if the signal candle did in fact close above it.
7) They are then trailed at each strong/weak candle after at least 2 strong/weak candles (strong for longs, weak for shorts) form not including signal candle.
8) Stops are also trailed at fractals (After stops are at least at breakeven or auto-breakeven because of a bollinger hit)

I will be posting examples within the next few days, but this system rarely trades because it only trades at significant levels which are not hit all the time let alone are accompanied by divergence.

This is on 4 hour USD/CHF, I may be taking this trade if the RRR is above 1.25 and there is a bullish bar after the doji, you see you can immediately take all signals on other japanese candles but with doji's they only signal a pause and you have to wait for a momentum swing to prove to you it is worthy.

With that said this follows all the rules:

1) it has hit both the bollinger and a coagulation of pivots (weekly s1 and daily s2)
2) It has a japanese candlestick formation (possible morning doji star), and the stochastic has turned at least 1 point.

The breakeven stop move (or cancellation of our entry order if the order is not hit by the time price reaches that ) is at the bollinger ma, and the stop is 5 pips below the low of the candle. its about a 1.55 RRR well within the confines of good money management ( I like 1.5 and higher when going against trend and 1.75 and higher with trend).

I will be taking this trade if I can get an entry with less than a 60 pip stop which is about .8% of my account, it will take 8 losses like this to put it in jeopardy (6%).



P.S. Bar has now closed, it is too much risk for my account but is a valid trade with the system, it will require 85 pips + which is 1% of my account and too much to risk when fighting this strong USD/CHF trend.
Let's see how it works out.

Good trade, it was too much risk for my small account and I was waiting for a second signal later that had less risk (there was a signal on the first large expansion bar BUT it was 100 pips of risk and was too much again. Oh well wait until the next one


Total pips bagged: 120; equal to 145 on EUR/USD

Total time in trade: 6 periods (24 hours on 4 hour candles)

This is the next trade I saw this morning. Stop is 58 pips, limit is 95 pips. News time is near over, GBP has made a solid bottom near its old horizontal level of 1.6405 and I will be entering at 1.6406 (about 50% of signal bar). Breakeven stop move (if in market) or cancellation level (if not in market by the time it hits there) is 1.6465

Gbp came within 1 pip or so of my cancellation and with it being an NFP day I don't want something coming back 45 pips and me buying lol. Oh well next trade.