Trading the Cable swings via averages

Check the post #1,089.

If the divergence is on the tops of the RSI, its bearish, if its on the bottoms its bullish.

Thank you very much!!

Well what can I say I have shown numerous examples now of the various types of divergence. The trick is to find them where we expect them to be as the charts below clearly show.

On the left 5min I have the EMA showing me where the swings are. The X symbol leads the EMA telling me to look for the divergence that may turn it around. The horizontal lines on the swings are the levels to be broken. When the average fails one side it tests the opposite side (which can also fail)

The 5 min chart on the right shows me two types of divergence at the X symbols.

a) Type one, the lower of the two, is a regular bullish divergence and we have resolved these will take price long. In other words they change price direction, reverse it if you like to express it that way and we note the average has failed to make the next lower low. . Now this type of divergence will do one of four things...

1) It will send price back across the EMA and the bulls will look for support which is what happened in this case.
2) It will fail to reach the EMA and then make a lower low.
3) It will reach the EMA and then bounce back and make again a lower low.
4) It will run into an opposing continuation divergence (ABCD is formed)

So this divergence was a type a1. As regular as it gets.

The two bar test presented us with both the entry and the stop level. (allow for spreads) and if we are just starting the trade we enter with our 1st of three entries.

Now it is important to do this because we could easily be wrong so we are not going to lose much. If we think even for a minute that we can't lose then we will lose lots of money by 'thinking' instead of taking precautions. Thoughts and actions are two separate things. Now there is a difference with this entry in that we have reached all the targets plotted on both the 1 hour and the 4 hour so in this case I would have just entered on the divergence without testing getting me in much earlier. The next bar after the div often spikes down a tad so I wait for it to close, see my div is working and then place trades 2 and 3 moving the stops as close as I dare. However this is extremely risky in a volatile market

Then look what happens 30 minutes after the divergence we get that red Div which is a continuation short signal, what do we do? A) panic, B) close. C) hedge

The answer is when in doubt HEDGE. This is going to give you time to see what happens, locks in your current profits and removes the panic you feel.

Sorry if this is a lot of words but there is a lot going on to explain.

End of part one I will continue this later....

OK I am back and continuing the saga.

So this entry at the lower div is presenting us with problems to get our three trades on. Every time we start a trade we go through the same routine of threats stressing us out. Why do this to yourselves? I here many say they got stopped out and how do I avoid this. I keep saying the answer is always simple, this trade should not have been an entry it should have been a very safe option to hedge the original short unless you have made you pips for the day, then just quit.

I know there are many who don't follow my money management preferring instead to get as many pips as they can for the smallest entry they feel comfortable with. Well even that method will benefit greatly from hedging the trade at the appropriate levels.

I also know there are many who just like to score a few pips here and there putting themselves through the same set of threats every time they take a trade.

This is definitely not smart and is far too risky in this volatile market.

If we hedge the bottom div then we have nothing to lose and all our southerly profits are locked in, We have absolutely no problems whatever the market does so we have no stress at all. Once the bulls found support we could have close the shorts and used the profits to add to now winning position of the bottom div.

However I see you guys are reluctant to do that and keep opening and closing trades. The only time we should be closing is when we are done for the day. We only want to go through the agony of an entry once per day, well at least I do.

Ok the trade now runs long and goes for a bout 150 pips, this would quadruple your account if done correctly.

We get to the top and start to run into RSI divs but there are a series of them we don't know which is going to work so our first reaction is to hedge the long and lock in all that profit from bottom to top. That is if we still wanted to continue trading else just close and count your money which should add up to about 5 x your account at least.

Ok I better quit there we are coming up to trading time.

Long term 4 hour looks like this..

1 hour chart looks like this

5 minutes is flat so we wait to show its hand...

Great thread. I'm hooked. I'm up to page 23. Great work Nala and many thanks for sharing.

is this a 1 hour bull div starting?

First tiny target hit on the 5 min

Mike look at thread 1646 just above

Yeah I saw it change fast, I went short and have the hedge on

Bear support is holding on the 5 min

Thank you Alan, these kind of posts are so instructive and helpful!

and again it seems

So we should now prepare for the 5 min bullish divergence to push price back to/across the EMA? so put on a hedge?

Alan would you of treated this as a signal to hedge? (taken slightly after)

Allan did you draw the abcd correct on this one?

looks like its holding the retest as well

Yes that is correct.

This locks up the profit. I then took another long trade below and remove the hedge as it past it so I was then hedged at the very bottom.

The hedge is now off on the touch of the EMA