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Trading the Cable swings via averages

  • #3,941
  • Jul 3, 2019 6:10am Jul 3, 2019 6:10am
Quoting RobertMY
{quote} Just a small thing: I am wondering if you handle RSIslow/RSIfast divergences equal, like it doesn't matter in what direction they are pointing. Or am I wrong and the question is solved at the point if the slow is below fast (and vice versa)? For me it seems like any RSI/RSI divergence points in the direction change towards average for you. Or am I just confused?
By RSI slow and fast I assume you are comparing these with one another which is correct and they try to send price back across the average which is the same as the RSI 50% level.

For example here you see an RSI div sending price back across the EMA followed by a hidden div also sending price back across the EMA
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  • #3,942
  • Jul 3, 2019 6:17am Jul 3, 2019 6:17am
Quoting RobertMY
{quote} Just a small thing: I am wondering if you handle RSIslow/RSIfast divergences equal, like it doesn't matter in what direction they are pointing. Or am I wrong and the question is solved at the point if the slow is below fast (and vice versa)? For me it seems like any RSI/RSI divergence points in the direction change towards average for you. Or am I just confused?
Hi Robert

I think I have a similar question, referring to post 187,

1. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short)

2. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short)

3. Price made HH, RSI 14 made LL, RSI 14 made did not, we hedge (Short)

These situations are different but leads to same action, short. Am I understanding your original question correctly?

(I can not answer your question but I am hoping that your question is similar to my confusion, hence I use a picture to explain).
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  • #3,943
  • Jul 3, 2019 6:19am Jul 3, 2019 6:19am
Really choppy and tough to trade this session... There will always be better times ahead.
  • #3,944
  • Jul 3, 2019 7:15am Jul 3, 2019 7:15am
Quoting luckyvictor
{quote} Hi Robert I think I have a similar question, referring to post 187, 1. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short) 2. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short) 3. Price made HH, RSI 14 made LL, RSI 14 made did not, we hedge (Short) These situations are different but leads to same action, short. Am I understanding your original question correctly? (I can not answer your question but I am hoping that your question is similar to my confusion, hence I use a picture to explain). {image}
Let me come closer to my question and an answer maybe with some thoughts:

1. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short)
This makes sense for me, because the RSI14 followed the price without RSI/PRICE divergence, but the faster RSI5 got exhausted and caused a divergence to RSI14. The exhaustion of the short indicator points to a change in direction of future price. Copy. - Unclear is a bit, if the "exhaustion" of the fast RSI is the right logic actually. Do we not expect a reversal if the opposite happens? Means if the RSI (so the fast as well) is strong, but not "weak/exhausted". Ok, now I doubt the sense...

2. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short)
Same thing.

3. Price made HH, RSI 14 made LL, RSI 14 made did not, we hedge (Short)
This is a classical RSI divergence.

I am just a bit confused about the RSI concept. It is about the "why".

If I understand the RSI as an indicator that indicates the "speed/momentum" of the change-rate of price away from an average (that why 50-line is average on chart) but the indication is influenced by recent moves more then by older ones (algo), then I see the concept: Price speeds up strong away from average and an end of that move is more likely than a continuation, because we have counter-power that comes in, later or earlier, more likely then not. So, RSI goes up, so the probability goes up for a counter move. (Forget now that some traders see the concept in the opposite way: They burn the RSI, but I tend more to be conservative)

Now we have a "fast RSI". This one takes the "slow RSI" as a source for its indication (RSI of RSI and shorter period).

And now I am lost. Because actually, we write "fast". But it is not only the period that changes but the data source as well.

And my attempt is to grasp, 1) why a RSI/RSI divergence should be considered as a signal and 2) what for kind of divergence.

Classically I have bullish and bearish divergences, normal and hidden. And they are leading to different directions, continuation or reversal. But our RSI/RSI divergences seems to lead just in one direction: Towards the average, so reversal only. And this confuses me further.

So, maybe, I do not have to understand this but just to get the fact that any RSI/RSI divergence leads there where I want to, namely profit. I could accept this.

But I would feel even more like a hero if I trade this concept successfully one day if I would know why it is so.



(Just ignore my logical philosophy if it has no benefit. I would be not insulted. We all want just to squeeze money from the market, at the end of the day, I know...)
Trying to safe the world...
  • #3,945
  • Jul 3, 2019 9:14am Jul 3, 2019 9:14am
Quoting Nala66
Just before the session starts today and I get busy I'll just say a few things about divergence which may help the newbies. There are several kinds of divergence:- 1) Regular bullish or bearish divergence. These should only be taken with supporting evidence such as a higher time frame ZOO point. 2) Continuation divergence which forms the ABC triangle to give a target D 3) RSI divergence where the Fast RSI conflicts with the slow RSI. 4) Hidden divergence where price for a fleeting moment was in regular divergence and snaps back to be hidden. This...
Alan does the PDF teach hidden divergence? If not, where can i find that education?
  • #3,946
  • Jul 3, 2019 9:19am Jul 3, 2019 9:19am
Quoting RobertMY
{quote} Let me come closer to my question and an answer maybe with some thoughts: 1. Price made HH, RSI 14 made HH, RSI 5 made did not, we hedge (Short) This makes sense for me, because the RSI14 followed the price without RSI/PRICE divergence, but the faster RSI5 got exhausted and caused a divergence to RSI14. The exhaustion of the short indicator points to a change in direction of future price. Copy. - Unclear is a bit, if the "exhaustion" of the fast RSI is the right logic actually. Do we not expect a reversal if the opposite happens? Means if...

I feel like answering your question, just want to be a more active member, also demonstrate my knowledge (if my understanding is not correct, then hopefully someone please correct me so that I can learn)

1) why a RSI/RSI divergence should be considered as a signal
Since RSI is a measure of the strength, strength in here can be either bullish/bearish power, the fast RSI 5 takes the source from slow RSI 14, so it is measure the strength of the recent strength.

In terms of market behaviour, sounds like it is saying, let say, RSI 14 makes HH and RSI 5 makes LL, this applies the recent power is decaying, the direction may turn. If RSI 14 makes LL and RSI 5 makes HH, this applies the recent power is already trying its best but still fail to cause the RSI 14 to make a HH, direction may turn.

2) what for kind of divergence
The classical div is always a measure to price, but this one measures the current strength, and this signal is usually found when price is away from EMA, so it just means there is a likelihood of price going back to EMA
  • #3,947
  • Jul 3, 2019 3:05pm Jul 3, 2019 3:05pm
Quoting blessedchuck
{quote} Alan does the PDF teach hidden divergence? If not, where can i find that education?
I doubt Alan ever studied that pdf
It's the work of DavidMaree.
I didn't know the answer myself and it took me 15 seconds to look that up. It's there. Just check the contents page and then the Divergence chapter....
Trading S/R with PA only. No indicators anymore!
  • #3,948
  • Jul 3, 2019 5:31pm Jul 3, 2019 5:31pm
Quoting RobertMY
{quote} ... I am just a bit confused about the RSI concept. It is about the "why". If I understand the RSI as an indicator that indicates the "speed/momentum" of the change-rate of price away from an average (that why 50-line is average on chart) but the indication is influenced by recent moves more then by older ones (algo), ...
I was trying to think a bit with you but it's late here and I didn't succeed. Though I wanted to mention that the recent move has IMHO not more weight in the RSI formula. Its basic is:
RSI(14)= avg gain (14 period)/ avg loss (14 period) with avg loss being a positive number.
Trading S/R with PA only. No indicators anymore!
  • #3,949
  • Jul 3, 2019 5:46pm Jul 3, 2019 5:46pm
Quoting Jazz1964
{quote} I doubt Alan ever studied that pdf It's the work of DavidMaree. I didn't know the answer myself and it took me 15 seconds to look that up. It's there. Just check the contents page and then the Divergence chapter....
i went through the pdf and it's not there. i copied all that info already in the pdf because i was going to make one (a pdf) with the same info.
  • #3,950
  • Jul 3, 2019 6:14pm Jul 3, 2019 6:14pm
Quoting Jazz1964
I also just came back home and just checked what opportunities were presented Who was able to catch something? The short just before 108 was valid but I wonder if I would have pushed the button. ABCD target on M5 just missed its target. {image}
Jazz, I'm not too familiar with hidden divergence yet, but do my lines on your chart below show bearish HD before the sell-off?

Cheers

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  • #3,951
  • Jul 3, 2019 6:33pm Jul 3, 2019 6:33pm
Quoting blessedchuck
{quote} i went through the pdf and it's not there. i copied all that info already in the pdf because i was going to make one (a pdf) with the same info.
Didn't I go through this stuff just yesterday post 3928, what else do you need to know?
  • #3,952
  • Jul 3, 2019 6:35pm Jul 3, 2019 6:35pm
Quoting Nala66
{quote} Didn't I go through this stuff just yesterday post 3928, what else do you need to know?
Thanks Alan, I just realised I didn't draw the line on the 1SMA on the price chart, so it's not valid!
  • #3,953
  • Jul 3, 2019 6:36pm Jul 3, 2019 6:36pm
Quoting k1w1
{quote} Jazz, I'm not too familiar with hidden divergence yet, but do my lines on your chart below show bearish HD before the sell-off? Cheers {image}
Not even close. I think you need to Skype me to get a verbal ear bashing mate.
  • #3,954
  • Jul 3, 2019 8:09pm Jul 3, 2019 8:09pm
Quoting RobertMY
{quote} Let me come closer to my question
Perhaps this will help a little.

Divergence is not really a term I would use but I wasn't around to invent it. I much prefer the term conflicting or whatever.

The point is we are comparing apples to apples (RSI to RSI) and not apples to pears (RSI to price) to locate these conflicting situations. By using these two RSI's in tandem like this we can glean so much more information than we would do with just the one.

I don't just look at the high/low swings but rather try to understand the story that is being unfolded from the information given.

Just above the conflict shown we see yet another conflict so our long would be terminated here and consider going short. Note how it is also at the 15M Zoo point.

So putting it all together we can track the ebb and flow of the price action
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  • #3,955
  • Jul 3, 2019 8:15pm Jul 3, 2019 8:15pm
Quoting Nala66
{quote} Not even close. I think you need to Skype me to get a verbal ear bashing mate.
Yes, I might just have to take you up on that! I definitely need to spend more time looking at your charts and manually back-testing trades...
  • #3,956
  • Jul 3, 2019 9:49pm Jul 3, 2019 9:49pm
Quoting Nala66
{quote} Perhaps this will help a little. Divergence is not really a term I would use but I wasn't around to invent it. I much prefer the term conflicting or whatever. The point is we are comparing apples to apples (RSI to RSI) and not apples to pears (RSI to price) to locate these conflicting situations. By using these two RSI's in tandem like this we can glean so much more information than we would do with just the one. I don't just look at the high/low swings but rather try to understand the story that is being unfolded from the information given....
Thank you Alan! This is a key hint in what direction to think. Divergence is an imperfect term. You made it clear! thx, thx.

I am surprised how much one can read from that indicator combination. Wow.
Trying to safe the world...
  • #3,957
  • Jul 4, 2019 12:25am Jul 4, 2019 12:25am
Well what can we make of this situation.

Is the weekly going to bounce or cross?
Is the 1H going to find bull support or fail again and head south?

We can only go by the signals to be presented hey!
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  • #3,958
  • Jul 4, 2019 12:49am Jul 4, 2019 12:49am
Quoting blessedchuck
{quote} i went through the pdf and it's not there. i copied all that info already in the pdf because i was going to make one (a pdf) with the same info.
It's sure there.
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Trading S/R with PA only. No indicators anymore!
  • #3,959
  • Jul 4, 2019 2:14am Jul 4, 2019 2:14am
Small moves again today, I hope things improve a tad
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  • #3,960
  • Jul 4, 2019 2:19am Jul 4, 2019 2:19am
I hope they improve a lot! LOL! 4th July holiday in the US. Is that going to put the kabosh on too much happening today in London?
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