EURNZD.......Missed
Attached Image (click to enlarge)
- #1,902
- Apr 30, 2019 8:40pm Apr 30, 2019 8:40pm
- Joined Jan 2009 | Status: Trader | 1,987 Posts
HD patterns forming on Daily charts. I will be waiting for entries on the 4HR.
- #1,903
- Edited 4:07pm May 1, 2019 3:50pm | Edited 4:07pm
- Joined Jan 2009 | Status: Trader | 1,987 Posts
Here is one way of trading the HD pattern. I am giving the example of NZDUSD: 
Here is another pair that will probably start a trading zone at the end of this week.
- Identifying a HD pattern on the Monthly chart (red vertical line).
- Going to the next shorter timeframe (Weekly chart) and waiting for MACD to cross the zero line wich is the start of the trading zone(green vertical line and blue rectangle). The trading zone will end when MACD crosses the zero line upwards.
- Entering trades in the trading zone each time MACD crosses the zero line (yellow circle), following the principle of cost averaging. In this case, I will be using the 4 HR timeframe.
Here is another pair that will probably start a trading zone at the end of this week.
- #1,906
- Edited 9:45am May 6, 2019 8:16am | Edited 9:45am
- Joined Jan 2009 | Status: Trader | 1,987 Posts
- #1,910
- Edited 8:25pm May 6, 2019 4:20pm | Edited 8:25pm
- Joined Jan 2009 | Status: Trader | 1,987 Posts
{quote} Thanks again Chamane. In my regular divergence trades, I enter based on candlestick so far. Making an entry after MACD crosses zero is something new for me. I know you are putting momentum in your side to support the trade but I couldn't understand clearly this entry method. Would you be able to share an example with exact entry, SL and target to finely understand. In above screenshots, HD is in Monthly, MACD crossing zero in weekly and entry in H4. How are all these three align? Also, some pointers to Cost averaging technique would be helpful....
Here is a recent situation where a hidden divergence was identified on the Weekly chart. I did not cherry picked that case, but simply took the first one I found on that timeframe. It is my way of analysing charts and my contribution to the discussion. I am sure that other traders have valuable techniques, starting with the author of this thread. I will try to explain the technique I use the best I can:
- Weekly chart. We can see that stochastic is starting to get higher than its last peak, but price is still lower (green vertical line). The HD pattern is shown by the thick yellow lines. We don't know at this point if price will continue to rise or fall, since there is that big rejection candle just preceding the pattern, telling that price has refused to go further down. I drew a trendline, but it is not obvious to tell the real level of support at that point. That is why I like to use as many convergence signs as possible. The HD pattern, the Fib major level, a doji with a big upper wick preceding an engulfing candle are some of those signs that can be enough to make a decision to enter a trade to the downside. Actually, the close of the engulfing candle can be use to enter the trade. Usually, I put my stop loss level at the last swing high, wich woud give a risk of about 236 pips. It is quite a lot and depending on the smallest unit that can be used, could be more than 5% of your capital. That is one reason why I like to switch to the lower timeframe to enter because risk is usually lower. If we trade only on this timeframe, the trade is still open but price looks like it might be caught in a range situation.
- Daily chart. After spotting the HD pattern (same green vertical line), I wait for MACD to cross the zero line for an entry signal. You can use also trendlines only, but I prefer the confirmation of MACD. You could argue that entering after the cross of the trendline would give a lower risk than the 239 pips and you would be right. Furthermore, Instead of using the last swing high, you can use the ATR value and cut down the risk by two. Anyway, there are many ways of managing a trade. In my case, I like to place my stop loss level at the last swing high and bring it to breakeven + a few pips when price reaches half the risk. For me, it is a matter of protecting my capital as soon as possible. And that's what would have happened as price reached 128 pips. Using a cost averaging approach gives a different perspective and an additional convergence tool for increasing the odds of success. I identified what I call a Trading zone by a blue rectangle defined when MACD is under the zero line.
- 1 Hour chart. I learned the cost averaging approach after reading Gerald E. Greene's book Turning Forex Trades into Winners. He suggests using timeframes 8 to 12 times lower than the main chart, but gives examples of charts as much as 30 times lower. In my example, the 1 HR chart is 24 times lower than the Daily and it suits my demo purposes. On the chart, I drew the same Trading zone mentioned earlier. In that zone, what I do is entering trades whenever MACD crosses the zero lines, put my stop loss levels at the last peak and bring it to breakeven + a few pips when price reaches half my risk. So there were 7 opportunities, 3 winners, 2 losers and 2 breakeven situations. The final result is an overall gain of +60 pips (-34+0+22+53+48+0-29) considering a RR = 1:1 on each trade.
That example shows different ways of approaching a HD pattern and the way I trade them. Hope It was clear enough.
- #1,912
- May 6, 2019 8:09pm May 6, 2019 8:09pm
- Joined Jan 2009 | Status: Trader | 1,987 Posts
GBPCAD is showing a potential hidden divergence pattern on the 4 HR timeframe.
{quote} As following: From the blue vertical line, is where the trade zone started. The white vertical lines are the entries you take, based on Chamane's entry method (cross of macd 0 line). These are also represented by the pink arrows. If you use Chamane's rules, which are: putting the SL on last swing low, moving SL to breakeven after price moved 1/2 the initial risk into profit, you will have got the following results (taking profit at Risk-Reward 1:1) Trade 1: BE Trade 2: BE Trade 3: +9 pips Trade 4: -17 pips Trade 5: BE Total of 5 trades,...
