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Hidden divergence

  • #1,841
  • Apr 8, 2019 12:13am Apr 8, 2019 12:13am
Hi Chamane, thanks for sharing this, do you use the same stop loss level for each trade in the "trading zone" and do you close all the trades at the end of the trading zone, or let them run until SL or TP?




Quoting chamane
{quote} Hi Jube, Here is an example of a recent price move to illustrate my point: The first chart on the left shows that the indicators are getting higher levels than their last swing highs, but price is still lower than the last swing high. That is when I mark the pair as a potential hidden divergence pattern for that timeframe (Weekly for instance). Then I would switch to the next lower timeframe to confirm the pattern. On the Daily chart, I would wait for the MACD to cross the 0 level. For me, this is the confirmation that the HD pattern on...
  • #1,842
  • Apr 8, 2019 2:52am Apr 8, 2019 2:52am
Hi chamane,
very nice thread and will be following.

i have not read all the posts but from what I gathered, you are focusing on Hidden Divergence on HTF first (trend following) rather than Classic Divergence (anticipating reversal which is riskier).
May I add that it is also a good idea to check the one up HTF to check of there is an opposite divergence.

—————

With LTFs, I want to hear your comments on this pls:

After we spot a hidden divergence in HTF, do you prefer hidden divergences (trend continuation) or regular divergences ( after a relatively longer retracement) on LTFs?

———
some times, the classic divergence on LTFs suggest unbias or a range because of the deeper retracement.

Nevertheless, i really like the idea of going to 8 times LTFs. Very nice. And can u pls direct us to the book you mentioned.

many thanks in advance
sorry for typo as writing from my phone
  • #1,843
  • Edited 5:36am Apr 8, 2019 5:24am | Edited 5:36am
Quoting danc
according to Greene's book ?? Chamane excuse my ignorance BUT were do i find Greene's book?? Thks in advance
Hi,

I mentioned it in the post #1832. You can get it at your favorite bookstore like Amazon or Goodreads.
  • #1,844
  • Apr 8, 2019 5:27am Apr 8, 2019 5:27am
Quoting bruderx
Hi Chamane, thanks for sharing this, do you use the same stop loss level for each trade in the "trading zone" and do you close all the trades at the end of the trading zone, or let them run until SL or TP? {quote}
Hi,
I set my stop loss levels at last swing highs/lows. I adjust the number of lots to get a 2% risk. If the last swing level is too far away from the entry, I skip the trade.
  • #1,845
  • Apr 8, 2019 5:35am Apr 8, 2019 5:35am
Quoting mtharwat
Hi chamane, very nice thread and will be following. i have not read all the posts but from what I gathered, you are focusing on Hidden Divergence on HTF first (trend following) rather than Classic Divergence (anticipating reversal which is riskier). May I add that it is also a good idea to check the one up HTF to check of there is an opposite divergence. ————— With LTFs, I want to hear your comments on this pls: After we spot a hidden divergence in HTF, do you prefer hidden divergences (trend continuation) or regular divergences ( after a relatively...
Hi,
I prefer hidden divergence because we are trading in the direction of the trend. However, I also look at regular divergence and the method proposed in Greene's book "Turning losing Forex trades into winners" and wich I discussed in my previous posts can be applied in such situations as well. I agree, we should look at higher timeframes to get the big picture, it is an additional confirmation signal that we have a good diagnosis.
  • #1,846
  • Apr 8, 2019 5:52am Apr 8, 2019 5:52am
Quoting chamane
{quote} Hi, I prefer hidden divergence because we are trading in the direction of the trend. However, I also look at regular divergence and the method proposed in Greene's book "Turning losing Forex trades into winners" and which I discussed in my previous posts can be applied in such situations as well. I agree, we should look at higher timeframes to get the big picture, it is an additional confirmation signal that we have a good diagnosis.
Thanks chamane,

Thanks for mentioning the name of the book. I like traders who educate themselves by reading books. I will try look it up.
Regards
  • #1,847
  • Apr 8, 2019 5:54am Apr 8, 2019 5:54am
Hello Dany78,

Thanks for starting this thread.

Looking for more indepth divergence analysis with you and chamane and rest of traders
  • #1,848
  • Edited 6:58am Apr 8, 2019 6:22am | Edited 6:58am
I entered EURNZD couple of days ago based on PA on Daily (break of TL and a hint of inverse H&S) and H1/H4 breakout.

Howvever, bullish divergence gave a head up before the break of TL.

OSMA (MACD Histo) was on a noticeable agreement on Weekly.

All of Divergences are Classic.
Attached Image(s) (click to enlarge)
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  • #1,849
  • Edited 7:01am Apr 8, 2019 6:34am | Edited 7:01am
One of the key things in Divergence is knowing when is the preceding divergence has ended.

NZD CAD H4 --- again enetred based on PA couple of days ago but when throwing in some indis, there are some observations.
First bullish divergence (between yellow vertical lines) ended with rejection of S/R then Bearish div (between white lines) came into play.


-------------

However, On daily chart, we have a Potential/Possible Bullish Divergence in the making when it hits support. Which may have caused divergence traders to not short this pair (just to be very cautious if HTF is not really ok interms of divergence).

-----

Not trying to confuse any one or to contradict with my first post here, but this is why I became less dependent on divergences although I was one of its big opponents. Still will be happy with your views/comments. It is a good thread to share our observations on trading divergence. There is nothing absolute or rigid in trading.
Attached Image(s) (click to enlarge)
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  • #1,850
  • Apr 8, 2019 7:21am Apr 8, 2019 7:21am
Quoting chamane
{quote} Hi, I mentioned it in the post #1832. You can get it at your favorite bookstore like Amazon or Goodreads.
Thank you for the reply..
  • #1,851
  • Apr 8, 2019 10:35am Apr 8, 2019 10:35am
Quoting mtharwat
One of the key things in Divergence is knowing when is the preceding divergence has ended. NZD CAD H4 --- again enetred based on PA couple of days ago but when throwing in some indis, there are some observations. First bullish divergence (between yellow vertical lines) ended with rejection of S/R then Bearish div (between white lines) came into play. ------------- However, On daily chart, we have a Potential/Possible Bullish Divergence in the making when it hits support. Which may have caused divergence traders to not short this pair (just to be...
Hi mtharwat,

Here are some comments on your observations.

  1. On the Daily chart, I prefer to use swing highs/lows that are next to one another. In the example, I would analyze the chart with the doted lines instead of the bold yellow lines. I know there are many traders that start their analysis two or three swings away, but it gives some noise between the start and the finish of the divergence lines. In those cases, you can look at the Weekly chart if the divergence sign shows up. In our case, the sign is there, but not very strong. Anyway, the bold lines diverge, but the pattern is still developing. This is when I like to confirm the pattern on a lower timeframe. Price can continue downwards to a point that the divergence pattern becomes not valid. The way I use for confirmation is the MACD cross of the zero line on the shorter timeframe.
  2. At the point of observation (vertical line),, that cross hasn't happened yet on the 4HR chart. What we see is a hidden divergence taking shape. The pattern was confirmed when the MACD crossed the zero line on the 1 HR chart (red vertical line). RR = 1:1 hasn't been reached yet, but it is getting there. I would bring my stop loss the breakeven + few pips.

I don't think there is any contradictary situations. When I see a pattern taking shape, I switch to a lower timeframe, giving room for some pips, even if there seems to be a pattern in the other direction. Just my thoughts.

Attached Image (click to enlarge)
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01
  • #1,852
  • Edited 12:15pm Apr 8, 2019 10:46am | Edited 12:15pm
Here is a losing situation. A HD pattern on the Daily chart, but price reversed after the cross of the MACD line on the 4HR. There were some low impact news for the CAD that probably strengthened the currency, Actually, if I had used Greene's method, I would have looked at the 30 minutes chart to enter and would have never got a signal.
Attached Image (click to enlarge)
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  • #1,853
  • Edited 7:17pm Apr 8, 2019 6:53pm | Edited 7:17pm
Quoting chamane
Here is a losing situation. A HD pattern on the Daily chart, but price reversed after the cross of the MACD line on the 4HR. There were some low impact news for the CAD that probably strengthened the currency, Actually, if I had used Greene's method, I would have looked at the 30 minutes chart to enter and would have never got a signal. {image}

Thanks for your two posts and the explanation and charts.

Regarding the second post, sometimes traders would use a confirmation from both MACD and histogram for divergence . It may help but will reduce number of setups.

Also some use the filtration of the one up HTF divergence not against their trade (even if it is still developing). I agree with you that we should not pay too much attention to it because more setups will be excluded. Only if the divergence on HTF has been matured, then it is a different story. I agree with your first post.
Like if we have Daily and H4 alignment and we shift to execution on LTF, the weekly divergence that is forming against us is of no such significance. The latter will just distract us.

Mind you elaborate more why Greene's method wont have had you shorting M30?

From Daily to M30, it is three TFs down only, right? or Do u mean going to LTFs with increments of one or two hours?

-------

I will be looking for more setups/examples in the future. I used to regard divergence as the king of confirmations and setups, then kind of changed my belief. I will be sharing number of observations in the future for our all benefit.

Currently I am focusing on PA (Candles and Renko) (S/R/TLS/Price patterns) but want to revisit divergence with like-minded traders.

I think Greenes's method (which I am not yet fully aware of) to go to very LTFs will open the door for more setups and being able to filter them and choose the best looking one or two.

Very good discussions chamane.
  • #1,854
  • Apr 8, 2019 7:32pm Apr 8, 2019 7:32pm
In my previous EURNZD Chart, the trade could go long with two different approaches: (Mind the current trade as it is irrelevant to the post. I entered it before I posted in the thread)

1- Trader could go long on the second vertical line as the current swing is diverging with the previous one without going too far back (I think this what you would like to do). However, the trader would be mindful to place his target where the daily declining Trend Line is and not anticipate a break out.

2- Trader would wait for the overall structure to break the long daily trend line and trade after the break out. That means checking many previous swings.

The first option I prefer more because I do not want to miss many setups that are happening at the moment.

IF we go further down to M5 to find setups based on the Daily (Two most recent swings divergence) , we will find many opps to jump in. In this case we can think of trendlines, PA, or even divergence (with more swings since it is a very low TF) or any other category that fits the bill.

I drew yellow vertical lines to pin point some of the possible setups. I myself prefer deeper corrections and breakouts.
Attached Image(s) (click to enlarge)
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  • #1,855
  • Apr 9, 2019 11:35am Apr 9, 2019 11:35am
Watching this pair closely. Might be going down soon.
Attached Image (click to enlarge)
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  • #1,856
  • Apr 9, 2019 11:57am Apr 9, 2019 11:57am
Quoting mtharwat
{quote} Thanks for your two posts and the explanation and charts. Regarding the second post, sometimes traders would use a confirmation from both MACD and histogram for divergence . It may help but will reduce number of setups. Also some use the filtration of the one up HTF divergence not against their trade (even if it is still developing). I agree with you that we should not pay too much attention to it because more setups will be excluded. Only if the divergence on HTF has been matured, then it is a different story. I agree with your first post....
mtharwat,

Answering your questions, here are charts showing 3 TF. In the first one, we see a HD pattern forming (red vertical line). I then switch to the next lower TF to confirm the pattern as soon as MACD crosses the 0 line (blue vertical line). We thus enter a trading zone (blue square). According to Greene's method, we should switch to a TF 8 to 12 times lower. In that case, it would be the 30 min chart. Then we take all trading signals, for instance each time MACD crosses the 0 line. But as we can see, there were no signal downwards, so no trade. In my case, I entered on the 4HR chart instead of waiting for signals on the 30 minutes.
Attached Image (click to enlarge)
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  • #1,857
  • Apr 9, 2019 12:34pm Apr 9, 2019 12:34pm
GBPUSD
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  • #1,858
  • Apr 9, 2019 5:34pm Apr 9, 2019 5:34pm
What increments of hours/mins does Greene advise in his book pls?

in MT4, we have 4h and 1hour.
in other platforms we may have 2hours, 8 hours, 12 hours, 10, 20 mims, etc or we can customise any interval.

Thanks
  • #1,859
  • Apr 9, 2019 7:35pm Apr 9, 2019 7:35pm
Quoting mtharwat
What increments of hours/mins does Greene advise in his book pls? in MT4, we have 4h and 1hour. in other platforms we may have 2hours, 8 hours, 12 hours, 10, 20 mims, etc or we can customise any interval. Thanks
HMi,
Here is what he says about his use of timeframes: "I have discovered that the key to success is to reference two time compressions that have a ratio between 8:1 and 12:1. For example, if I use the 10-minute chart with the two-hour chart, or the 30-minute chart with the four-hour chart, or the two-hour chart with the day chart, the market harmonics allow the trader to make decisions using the market oscillations more effectively. When working with these ratios the various oscillating tools seem to work better. I have not tried to determine why these work, but have just accepted them and use them to my advantage".
It is part of chaper 5, a key one in his book.
  • #1,860
  • Apr 9, 2019 11:42pm Apr 9, 2019 11:42pm
Quoting chamane
{quote} HMi, Here is what he says about his use of timeframes: "I have discovered that the key to success is to reference two time compressions that have a ratio between 8:1 and 12:1. For example, if I use the 10-minute chart with the two-hour chart, or the 30-minute chart with the four-hour chart, or the two-hour chart with the day chart, the market harmonics allow the trader to make decisions using the market oscillations more effectively. When working with these ratios the various oscillating tools seem to work better. I have not tried to determine...
Very Kind of you chamane,
Thanks
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