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Hidden divergence

  • #2,081
  • Jun 19, 2019 8:28pm Jun 19, 2019 8:28pm
4 hr asx 200 worth a look
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  • #2,082
  • Jun 20, 2019 12:29am Jun 20, 2019 12:29am
I read in few internet articles and MACD videos, that the trade will be of high probability if momentum and MACD Zero crossover builds together (refer circled area in AUDUSD M15 chart of 13/06/19). I found that seem to be positive in my backtests. If you could, share your experience on this.

In relation to the above, I've a doubt and would like to have your feedback.
Refer attached EUR/AUD charts of H1 and M5. There is no hidden divergence here but entering the trend of H1 timeframe using M5 timeframe with help of MACD. MACD crossed above zero after 6 bars of momentum buildup in MACD histogram (Trade zone got marked) and when we drilldown to lower timeframe for entry, the MACD & MACD-H has gone far from the zero line. Can we enter the trade in M5 assuming the higher timeframe momentum will push the prices up or await next crossover?
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  • #2,083
  • Jun 20, 2019 1:46am Jun 20, 2019 1:46am
Quoting chamane
{quote} The last swing high is the closest highest level reached by price. For example in the pic, if you enter on the first down arrow the first circle can be your last swing high and if you enter at the close of the second arrow, the second circle can be your last swing high. You can then set your stop loss at those levels. {image} RR means "risk to reward ratio". A RR = 1:1 means that your profit should equal your risk, a RR = 1:2 profit should equal twice your risk, etc.
I've indeed graps a lot of knowledge and idea from you!! You are a genius at this stuff!!!! Thank you so much for being so kind . I'm like a pro now because of this thread and this forum. Thank you all!!!!!!!!!!!!!
"The market doesn't care about you, stop hoping it will." Dirk
  • #2,084
  • Jun 20, 2019 8:03am Jun 20, 2019 8:03am
Quoting rmchokku
I read in few internet articles and MACD videos, that the trade will be of high probability if momentum and MACD Zero crossover builds together (refer circled area in AUDUSD M15 chart of 13/06/19). I found that seem to be positive in my backtests. If you could, share your experience on this. In relation to the above, I've a doubt and would like to have your feedback. Refer attached EUR/AUD charts of H1 and M5. There is no hidden divergence here but entering the trend of H1 timeframe using M5 timeframe with help of MACD. MACD crossed above zero after...
rmchokku,

I couldn't find your example in my charts, i'm not sure I understand your question. The point of drilling down is to enter trades in the direction of the higher timeframes, increasing your odds to success. It can be a strategy in itself, but I find it a useful convergence tool to add to the list in a hidden divergence strategy. But indicators don't push price, it's the other way around, they follow it. They lag, that's why I always look at the higher timeframe before entering a signal. I would not advise to enter in the middle of a move, just wait for signals to trigger. In a cost averaging approach where timeframes are rather far apart, it is the sum of the entries that result in a winning situation so it is important not to skip an entry in the trading zone. I hope I answered your question.
  • #2,085
  • Jun 20, 2019 8:26am Jun 20, 2019 8:26am
EURUSD.
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  • #2,086
  • Jun 20, 2019 9:29am Jun 20, 2019 9:29am
there are a few cases whereby Continuation Divergence appeared first then followed by Reversal Divergence, how do you guys deal with such scenario if you have already opened trade on the first Continuation Divergence?
  • #2,087
  • Jun 20, 2019 10:22am Jun 20, 2019 10:22am
Quoting chamane
EURUSD. {image}
Beautiful one... macd is yet to cross zero.. still wait for entries on trading zone
"The market doesn't care about you, stop hoping it will." Dirk
  • #2,088
  • Jun 20, 2019 11:37am Jun 20, 2019 11:37am
Quoting belief
there are a few cases whereby Continuation Divergence appeared first then followed by Reversal Divergence, how do you guys deal with such scenario if you have already opened trade on the first Continuation Divergence?
belief,

Please give an example of the situation. I don't pay attention too much on that matter. Divergence doesn't mean that price will continue or reverse, it means that the momentum is increasing or decreasing. We need other signals to enter a trade like the cross of a trendline or a sign of an indicator. I switch to a lower timeframe because it gives more room for price to reach a RR = 1:1. If there is a regular divergence after my entry on the main TF, it can mean that it's time to get out of the trade I'm in, Actually I sometimes trade the regular divergence as well with an entry on the lower timeframe. I think that you can have many divergences in a row in a range market, less in a trending one.
  • #2,089
  • Jun 20, 2019 9:30pm Jun 20, 2019 9:30pm
Quoting chamane
{quote} rmchokku, I couldn't find your example in my charts, i'm not sure I understand your question. The point of drilling down is to enter trades in the direction of the higher timeframes, increasing your odds to success. It can be a strategy in itself, but I find it a useful convergence tool to add to the list in a hidden divergence strategy. But indicators don't push price, it's the other way around, they follow it. They lag, that's why I always look at the higher timeframe before entering a signal. I would not advise to enter in the middle...
Its not a hidden divergence trade but the trend trading strategy mentioned by Gerald Greene using MACD. As its a common question for both HD and trend trading strategies, thought it will be good to know fellow traders' experience.

In the EUR/AUD charts given above, H1 chart is bullish, also confirmed by MACD crossing above zero. I'm intending to capture that up move using lower timeframe chart M5 with the help of MACD (whenever crossing above zero). In both H1 & M5 charts, Momentum (MACD Histogram) has formed considerably before MACD crossing above zero is formed (i.e. MACD & MACD-H are not forming together below zero). If we join the trend now, the potential shortfall is that we won't know how much momentum is still present for price to move in intended direction. In this regard, asked for members' experience and will they join the trend now or await for next move (where momentum & MACD build together).
  • #2,090
  • Jun 21, 2019 6:07am Jun 21, 2019 6:07am
Quoting chamane
{quote} belief, Please give an example of the situation. I don't pay attention too much on that matter. Divergence doesn't mean that price will continue or reverse, it means that the momentum is increasing or decreasing. We need other signals to enter a trade like the cross of a trendline or a sign of an indicator. I switch to a lower timeframe because it gives more room for price to reach a RR = 1:1. If there is a regular divergence after my entry on the main TF, it can mean that it's time to get out of the trade I'm in, Actually I sometimes trade...
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as you see both reversal and continuation divergence appeared at the same time, which way should we take?
  • #2,091
  • Jun 21, 2019 6:50am Jun 21, 2019 6:50am
When reversal and continuation appear together, its advised to take continuation signal than reversal.

The first regular divergence, i.e. reversal signal has formed two equal highs in the indicator. I interpret that as momentum is still strong, equally good when compared to previous peak. Hence, its likely that price will continue its previous trend for some more time before reversal. Unless I clearly see lower momentum between the peaks in indicators (MACD, MACD-H & RSI), I don't pickup the reversal. The second regular divergence (reversal) seems to be ok @ indicator level, but the bearish candles are not strong enough in the second peak.

Continuation signals (Hidden divergence) has worked well. Also, in the last two swing lows, there is no hidden divergence. Most likely, price could make a deeper pullback when further reversal signals are formed (divergence + bearish candles + S/R area)
  • #2,092
  • Jun 21, 2019 7:50am Jun 21, 2019 7:50am
Adding another entry in the trading zone on the 30 min chart. Up +82 pips altogether now. All trades secured.
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  • #2,093
  • Jun 22, 2019 9:35am Jun 22, 2019 9:35am
I have a similar trading system.I got stable profits by using my system for a long time.
I‘m from China,my English is not good.Sorry...
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  • #2,094
  • Jun 23, 2019 8:19pm Jun 23, 2019 8:19pm
Watching this pair closely.
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  • #2,095
  • Jun 24, 2019 5:24am Jun 24, 2019 5:24am
A HD pattern devellopping on the 4HR chart.
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  • #2,096
  • Jun 24, 2019 7:05am Jun 24, 2019 7:05am
Quoting chamane
Watching this pair closely. {image}
Hello Team,

Thank you for spotting yet another Chamane,

Entered a demo a few minutes ago @ 1.11042, ideal entry could have been secured at 1.1113. (not too far off)

MJ
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  • #2,097
  • Jun 24, 2019 7:22am Jun 24, 2019 7:22am
Quoting Mojotrades
{quote} Hello Team, Thank you for spotting yet another Chamane, Entered a demo a few minutes ago @ 1.11042, ideal entry could have been secured at 1.1113. (not too far off) MJ {image}
Mojotrades,
I would personally wait for price to cross the dotted trendline before entering short. There is a bullish HD pattern developping on the 1HR TF. It has to be confirmed, but price might want to go up for a while before heading down.
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  • #2,098
  • Jun 24, 2019 8:20am Jun 24, 2019 8:20am
Quoting chamane
A HD pattern devellopping on the 4HR chart. {image}
Chamane,

Please help me understand, why you would not enter the AC trade highlighted below?
Thank you.
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  • #2,099
  • Jun 24, 2019 9:43am Jun 24, 2019 9:43am
Quoting Mojotrades
{quote} Chamane, Please help me understand, why you would not enter the AC trade highlighted below? Thank you. {image}
Mojotrades,
You could have entered at the dotted mark on the 1HR chart and made some 10 pips or so, but I prefer to wait for MACD to cross the zero line. I find that signal more reliable. It didn't (circle), but it might as price seems to be reversing down on a regular divergence. The HD pattern on the 4HR chart would still be valid. But we never know what's going to happen, let's wait and see.
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  • #2,100
  • Jun 24, 2019 9:54am Jun 24, 2019 9:54am
EURCHF. HD pattern on the 4HR TF, entered on the 1HR TF.
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