Hidden divergence

CADJPY:

CHFJPY is still forming:

AUDUSD following up. HD pattern still valid on the Daily chart and the start of a Trading Zone on the 4HR chart. I will be monitoring bullish entry signals on the 15 min timeframe.

A similar situation with CADJPY.

I had the opportunity to take two trades in the Trading Zone, I was not there for the third entry:

1. A HD pattern on the Daily chart at the blue vertical line.
2. Same blue vertical line on the 4HR chart and the start of a Trading Zone (TZ) at the red vertical line.
3. Three entries so far in the TZ on the 15 min chart.

+31 pips cashed in for me so far.

1M Divergence

EURCAD.

1. Bullish Hidden Divergence pattern on the 4HR chart.
2. Bullish Regular Divergence pattern on the 1 HR chart.
3. MACD zero line cross on the 1HR chart. It can be an entry signal, but it would be better if price crossed the resistance level.
4. We can still switch to the 5 min chart and wait for entry signals as we just entered a Trading Zone.

Let's wait and see how price will behave.

Hi chamane, I noticed that there wasn't any regular divergence on the H4 timeframe. Is it good to take the trade with just hidden divergence alone? Also I noticed that your stochastic indicator setting differs on daily(5,3,5) and h4(8,3,5). Was it part of your trading? Thank you.

Hi RayV,

The way I analyze charts, I am looking for as many convergence signs as possible. It all starts with a Hidden Divergence pattern under development on the main chart. Then I look for:

1. HD pattern on both MACD and Stochastic indicators (main chart).
2. Fib levels (main chart).
3. Cross of resistance/support level (lower timeframe).
4. MACD zero line cross (lower timeframe).
5. Regular Divergence pattern (lower timeframe).
6. Trend overall direction (higher timeframe).
7. Cost averaging approach in the Trading Zone - TZ (lower timeframe).

If you find all those signs at the same time for a given pair, you are putting the odds in your favor. Although I did not show all of them in my previous post, here is what we can find:

Daily chart (main chart):

1. HD pattern on both MACD and Stochastic.
2. 23.6 Fib level.
3. Trend overall direction (I am using Ichimoku Cloud 27-78-156 in my example).

4HR chart (lower chart):

1. Cross of a trendline.
2. MACD zero line cross (start of a TZ). The TZ starts when MACD crosses the zero line in the middle chart (4HR in this example) and ends when it crosses back the zero line.

15 min chart (lower chart - TZ):

1. Cost averaging approach in the TZ. Taking every MACD zero line cross in a timeframe 8-12 times lower or so than the middle chart.

So you are right, we do not find a Regular Divergence pattern on the middle chart (4HR), but there were many other convergence signs to rely on. Having a combination of a HD pattern on the main chart and a RD pattern on the middle chart is a strong signal. But when there is not, I rely greatly on the signals in the TZ. They minimize losses when price is not going in the right direction and they allow you to catch most of the big move when there is one.

I should add that the Stochastic settings are not that important to me as long as they are not far apart from each other. 5-3-3, 8-3-3, 13-3-3 give similar results. I chose 5-3-5 because I found that the high/low cycles have been kind of short the past couple of months. 8-3-3 is the settings I use the most.

Hope this helps.

USDJPY. A pair showing a downtrend on the Daily chart with a bearish HD pattern. Waiting for entry signals on the 4HR chart.

Wow, this will help for sure. Thank you so much for this detailed explanation chamane. By the way, how do you find your pairs to trade? Do you go through all the pairs to find HD daily or you use some sort of indicators like currency strength?

GBPUSD:

D1 showed Double Top. But it's nice RD at M30 and about 120 pips to the nearest resisance- unclear story

I often use the MACD zero line crosses (ZLC) as entry signals. So the easiest and fastest way for me to scan all pairs is to look for a MACD ZLC on each chart and then switch to the next higher timeframe to see if there any sign of a Hidden Divergence pattern developing. If there is, I can decide to enter at the close of the candle or switch to a lower timeframe to trade according to a Cost Averaging approach.

I sometimes look at currency strengths. It indicates which pairs to look first.

AUDUSD. Another HD pattern situation on the 4HR chart.

Anatomy of a trading situation. I am always analyzing why a trading setup gave good results or bad results so I can find ways to optimize my technique. Here is a recent situation that gave good results:

AUDUSD

1. Daily: A bullish Hidden Divergence pattern is developing (red vertical line) and is shown on both indicators. Switching to the next lower timeframe to check for entry signals.
2. 4HR: An long entry signal is given by the MACD zero line cross (ZLC). It is also the start of a Trading Zone. Whenever I can, I prefer to use a Cost Averaging approach by switching to a timeframe 8-12 times lower and check for entries as long as the trading zone is valid.
3. 30 min: All entries (ZLC) are shown at the blue vertical lines. Aiming a RR=1:1 is a good option for me.

Im not trading till next year, but saw this
USDJPY
Weekly OS
Dayly HD
Time studies
Fibos
Trendline

All pointing south
Happy New Year

Thanks cuchuflito. Nicely spotted. We'll see what price will be deciding. Happy New Year to you too.

[quote=chamane;13331680]{quote} Hi RayV, The way I analyze charts, I am looking for as many convergence signs as possible.
Excellent! I do something similar.
"Putting the odds in your favour"

I have an excel 15 point filter list.Which I apply on both time frames .
Each filter has a score.The higher the score.
It also serves as a checklist to be followed before even considering pulling the trigger.
Then I have at least 4 different entries. So if I get stopped in the beginning, hopefully with only one position. If the market goes my way, and the other entries trigger, then my winners tend to be bigger than my losers.
Sounds complex, but if you are not trading 5 minute charts, you have enough time to do your homework.
It´s a probability game.No praying.

That is useful especially with divergence patterns. Entry points are not that obvious.