Hidden divergence

There are a few news for USD: be alerted!

I just finished backtesting this week's 4 HR timeframe where I spotted Hidden Divergence patterns and once again it was profitable overall. Here are my analysis parameters:

1. AC indicator for HD pattern identification on the 4 HR charts.
2. AO indicator for entries on lower timeframes - cross of the zero line (1 HR and 5 min charts following a Cost Averaging approach).

AUDCAD. +29 pips.

AUDCHF. A HD pattern on the 4HR chart, but price reversed on the 1HR TF after the bullish entry for a loss of 36 pips. This is when the Cost Averaging approach I am using comes handy. After the entry signal on the 1HR TF, I switch to the 5 min chart and take all entry signals in the blue Trading Zone. In this case,, there were two, one winning and one losing. But overall, it is better than a bigger loss on the 1HR TF.


AUDJPY. A +39 pip trade on the 1 HR TF.


AUDNZD. A +49 pip trade.


AUDUSD. The trade is still open with a risk involved of 40 pips. Price is close the stop loss and we have to wait and see. If the trader had chosen the Cost Averaging approach, he would have traded on the 5 min chart in the blue Trading Zone and would have gotten 2 wins.


EURAUD. The HD pattern was spotted on the 4 HR chart and the entry was made on the 1HR chart with a risk of 66 pips at the last swing high. Price only made 62 pips and then reversed. As I mentioned before, I bring my stop loss to breakeven + a few pips whenever price reaches half the risk in profit which it did. But here again, using a Cost Averaging approach and taking all entries on the 5 min chart in the blue Trading Zone would have been more profitable (3 wins and 2 losses).

GBPNZD. A +117 pip trade on the 1 HR chart. That pair has a big spread at many brokers, I very sledom trade it.

NZDUSD. A +31 pip trade on the 1HR chart.

USDCAD. A +64 pip trade.

USDJPY. This trade would have been stopped out at Breakeven.
Using the Trading Zone on the 5 min chart, there were 2 wins and a loss.

I want to point out that using a Cost Averaging approach is the best way to trade in my opinion and it fits all situations. Trading the 5 min chart is not appropriate for all pairs in the case of high spreads. I would suggest AUDUSD, CHFJPY, EURCHF, EURGBP, EURJPY, EURUSD, GBPUSD, NZDJPY, NZDUSD, USDCAD, USDCHF, and USDJPY.

Interesting AO + AC indicator.

Keen to test this out, able to share?

They are Williams Accelerator (AC) and Awesome (AO) oscillators. You should be able to find them as default indicators in most platforms. Actually, I think that AO is close to the (5,34,5) MACD line and AC its histogram.

AUDJPY. The last hour candle is bearish, but I will still be waiting for price to cross that resistance line.

The approach is to scalp at 5M TF whenever entry is validated at 1H TF?

Is this a valid HD @ CADJPY ?

Yes. The approach I use is to switch to the next lower timefframe as a HD pattern develops in the main chart. I then wait for price to cross trendlines, candles to show strong price action and mostly MACD to cross the zero line. Once it's done, you can either enter the trade or switch to a timeframe 8-12 times lower and take all MACD zero line crossings in the Trading Zone (which ends when MACD crosses back the zero line on the 1HR chart). So in our case it would be a HD pattern developing on the 4 HR chart, the start of a Trading Zone on the 1HR chart and entries on the 5 min. You can scalp if you want, but I use the last swing as the stop loss level and a profit level the same as the risk (RR=1:1).

I usually consider the last swing for HD pattern recognition (dotted lines), but in this case I am taking the major trendline (bold). I believe that price will go a few pips down, then bounce upward on the trendline as it coincides with a support level (pinkish zone) and also the 38,2% Fib number. But you never know for sure and price might invalidate the pattern. From now on, you can check if MACD crosses the zero line on the 1HR chart for an entry signal. If it does, we will be in a HD pattern situation with many convergence indicators.

GBPCAD. Another pair to watch at the start of this week on the Daily chart.

Here is an interesting situation. A clear HD pattern on the 4HR chart, but price has reached a strong resistance level at around 76,75 which we can see on the Daily chart. I won't be entering unless price decides to clearly break that pennant on the Daily.

USDCAD:

CADJPY:

GBPJPY:

CADJPY looks more inviting.....

GBPJPY, H1:

USDCHF. +15 pips.

USDCAD. Looking good. Just brought my stop loss level to breakeven + a few pips.

Looking for a clear break upward.

Bear seem to have slowed down....Lets see how far NY will take this down or up?