Trading the Cable swings via averages

One last question about divergence:

Does the side the signal is on determine whether one should go long or short? So for instance in the attached photo we got Alan's divergence on both the Lower and Upper side of the RSI. Let's say we have confirmation from higher timeframe where we expect price to travel north. Is it okay to go long on both types, or should we only go long when we find divergence on the lower part of RSI?

If you expect price to drop then look for divergence at extremes by looking at the tops (higher vs lower highs). If you expect price to increase then look for divergence at extremes by looking at the bottoms (lower vs higher lows). Cheat sheet here. https://www.babypips.com/learn/forex...ce-cheat-sheet. Don’t focus on “hidden divergences” to begin with or you will get confused.

In your picture the RSI 5 and RSI 14 hit extremes immediately after your first divergence example and form an Allan divergence. This was the initial trigger to sell based on the higher timeframe divergence also indicating a sell.

To begin, only focus on regular divergence at extremes. By extremes I mean RSI 5 over 80 and RSI 14 over/close to 70. This will ensure success.

Just getting back to the thread after yesterday's storm, PA moving from 2773 to 2423 (350 pips)and disrespecting divergences in the process. But our system is able, all the time.

I can see that Pakeha has done a good job with your question. That is the spirit. Like he explained, the drawings of M15 and H4 are not divergences because they are facing the same direction. In a divergence, one is either flat and the other slanted or both are slanted but facing different directions. The best points to watch out for are the extremes: levels 80 and 20. Once price action (PA) gets there, look up to see if the price is also at a peak or at a bottom; then you are in business because the price will soon change direction down to the average (EMA 26).

What determines whether you should go long or short is the position of price at the time you spot the divergences. Is the price high up, in which case the bulls have dissipated their strength and the bears are taking over; or is it at the trough, where it is vice versa. And once you follow Alan's rules, you are home and dry.



At present, we have a tiny Alan's divergence on H4. The slow RSI is slanted downwards whereas the fast RSI is flat. So, while people are bemoaning the crash of yesterday, our system is saying brace up for a move northwards. So, we wait and watch very closely

Bydyke

I also have a bullish "Allan divergence" on H1.

do you mean this?

yes, that's the one

bear on the 15?

A hidden divergence Mike?

My preference for context is the H4/H1 TF (the move should last longer), and when the divergence is at momentum (RSI) extremes. Will be interesting to see if we get any volatility before London given what happened earlier in this session.

Yeah Im not 100% sure, still watching them play out.

There is 80 pips down to the 1.247, that was a level I pulled off the daily, I couldn't see another Hourly to use as a target further south

Yes, you are right: an overlap from yesterday

Also an abcd set up if it retraces 50%, 80 pips to 1.26349

though I'm not 100% on that either, comments welcome

Morning all, I am long on the 1hr DIV with the 2bar test in the valley area, and it may give a second 2 bar test now as well at the end of the hour

Then looking at the 5min added to it.

Added to it

choppy start, in range, couple of divergence signals, see if this plays out

Price is now approaching H1 MA, will you guys close all long trades and wait for PA around MA for further trades?

10 pips roughly to the EMA

Had this add as well

ema making HL's so price should make the next high but I need to step out now so closed out for +35 pips just before the 1hr ema

Hope you are in; 30 pips in the good already. 2635 is now in sight