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Help regarding MACD, Stochastic, RSI & Divergence

  • #21
  • Edited 6:48am Nov 5, 2010 6:30am | Edited 6:48am
One thing that is never mentioned when talking about divergence is that divergence is only obvious after the fact. If a market is coming down to re-test a price you are nearly always going to get divergences because of the way the indicators are calculated. Now sometimes the market will bounce and you'll say look divergence worked. But other times price will continue down and the divergence will not have worked.

Look at any market in a persistent trend like the Yen you will see divergences all over the place and none of them worked.

Stockcharts has a good description of all the common indicators and how they are calculated

Edit: I notice that Las has made almost the same point. However what I would say is that after a double bottom/top you will always get oscillator/momentum divergences so it does not really confirm anything. It is a redundant.
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  • #22
  • Nov 6, 2010 12:02pm Nov 6, 2010 12:02pm
Thank you Shabs19
  • #23
  • Aug 14, 2011 10:28am Aug 14, 2011 10:28am
Quoting diavolul
RSI, I consider it's not very good for picking divergences (on 14 configuration)
Yes, it's a little stiff, but RSI on a lower period is good. I use the 9 period RSI presently and like it.

I like both stochastics and RSI for divergence. Sometimes a move will be so big that it blows the stochastics out, but RSI will still indicate a divergence. Other times RSI will not register divergence but stochastics will.

I have an automated MACD divergence between bar heights running on my charts, so do not use it as an indicator to note only divergence between peaks (I find it slightly confusing too).
  • #24
  • Nov 10, 2011 11:20pm Nov 10, 2011 11:20pm
guy, the distributive patterns in stochastic is less reliable then the normal divergence, or there is no different?

thanks.
  • #25
  • Dec 6, 2011 2:39pm Dec 6, 2011 2:39pm
Help needed. I have been experimenting with the stochastic a lot. And i have really begun to like the clear peaks and bottoms, as compared to other oscillators; more so in the case of slow stochastic. Often i have noticed that in slow stochastic, head and shoulder pattern appears, the break whose neckline is quite reliable. The pattern is even more successful if it takes place around the over-bought zone. Similar is the case with inverse head and shoulders. Is anyone trading the stochastics using patterns? The pattern tends to work well in lower time-frame. Seniors please comment.
  • #26
  • Sep 18, 2012 4:29am Sep 18, 2012 4:29am
I use MACD divergence a lot. Does anyone know of an indicator for divergence that can be used on M4 platform?
  • #27
  • May 2, 2020 12:11am May 2, 2020 12:11am
I do use these 3 indicators with the following settings:
1. MACD (12,26,9)
2. Stochastics (5,3,3)
3. RSI (9)
Buy only when MACD > 0, RSI > 50 and stochastic is turning up
  • #28
  • Oct 18, 2020 11:30am Oct 18, 2020 11:30am
I use MACD and RSI with default setting. RSI help to reduce extra noise in price action. RSI is also good for identifying momentum.
  • #29
  • Aug 24, 2024 11:25am Aug 24, 2024 11:25am
Quoting ghous
{quote} Let's go abt it in chunks... {quote}You sure can. In fact I think I read abt someone who has a system based entirely of the three indicators you mentioned. I don't think I am allowed to post the link here but I'll pm you. {quote}I've never used them together so I won't be able to help you on this but again the link in the pm may assist you. {quote}The 3 indicators you mentioned are the most common and a proper combination will work if you know how to effectively apply them. abt them being sufficient, I would only recommend you to try and...
Thanks for this comment, am reading it in 2024 August .
Let me say am doing Literature review here today.
I have tried all these MACD, RSI, Stochastic ,Fractal Awesome and lit more.
The truth about indicators is that they have outlived what those investors designed them for.
We are in a new phase of Money Market where market structure is what one should try to understand and little little hitches in market structure lapses ,one can bring in indicators to adjust .Cos I have traded market structures too and it is not 100% certainty that market will follow your lines.
So in those areas of deviations indicators can come in.
One must know at that level of introducing indicators that it won't be used as a novice again but a stylishly different manner from what and how people used it
In general I found Stochastic Divergence convergence a bit more reliable than other in these order.
4hrs/30mins 1hr/15mins using the higher ,then analyse in the lower
There are other things I can't discuss further here being a public fora.
Trust me no one will like to talk 100% of their secret here
  • #30
  • Nov 4, 2024 2:04am Nov 4, 2024 2:04am
Quoting mohamedrizal
Hey Guys, I am a newbie in forex trading and i will really appreciate if anyone can share their experience regarding MACD, Stochastic, RSI & Divergence. A little about how i trade: * Time Frame: Daily Charts * Currency: GBP/USD * Indicators Used: MACD, Stochastic, RSI & Divergence (all defaults mode) Now what i will like to know/seek advise on is: * Can i use all these indicators together? * Can i used them on defaults modes? if not, what's the best setting for each of these indicators for my trading style/period....and also why? * Do they work...
Hello!
Yes, combining MACD, Stochastic and RSI is a great approach as these indicators can work well in unison. Here’s the thing:
Combining techniques: Completely possible! Just ensure not to make your charts too complex. It is always a nice sight to view most indicators lined up in a similar direction.
Default configurations: They are appropriate for the initial stages but adjustments can be beneficial. For instance, if you would like to eliminate noise, you can try 14-3-3 settings with the Stochastic instrument. It is all dependent on how you trade so don’t hold back!
Efficiency: It is true that such indicators assist in making trading decisions, but they should comprise only a portion of the available resources. For a better perspective, something like trend lines or support and resistance levels might do more good.
Your strategy: It is understandable why you want to see 2-3 indicators confirm your analysis. This is a good way to avoid many false ends. Just do more and better every time!
  • #31
  • Nov 19, 2024 4:24am Nov 19, 2024 4:24am
Quoting Phant0m134
{quote} Hello! Yes, combining MACD, Stochastic and RSI is a great approach as these indicators can work well in unison. Here’s the thing: Combining techniques: Completely possible! Just ensure not to make your charts too complex. It is always a nice sight to view most indicators lined up in a similar direction. Default configurations: They are appropriate for the initial stages but adjustments can be beneficial. For instance, if you would like to eliminate noise, you can try 14-3-3 settings with the Stochastic instrument. It is all dependent on...
Great suggestion, basically those three are the best indicators to combine in my view
  • #32
  • Nov 26, 2024 9:32am Nov 26, 2024 9:32am
Hello, my name is Antony and I am an Italian trader.
I would like to express my opinion. The three indicators mentioned, Macd, RSI and Stochastic are unfortunately not useful for creating profitable trading strategies.
These three indicators have no predictive capacity and are therefore useless. The only public indicator that makes sense is the R Square because it quantitatively measures the strength of a trend and gives us a real statistic on the linear regression model.
Instead of the artimetic averages, a linear regression is more precise, the stochastic and the rsi are useless because they suffer from the directional component of the market.

Thanks and sorry for my english.
Antony
  • #33
  • Last Post: Nov 30, 2024 3:36am Nov 30, 2024 3:36am
Hey! Your approach of confirming with 2-3 indicators is solid and helps reduce false signals.

  1. Using them together: Yes, they complement each other well (MACD for trend, RSI for momentum, Stochastic for overbought/oversold).
  2. Default settings: Fine to start with, but you can adjust them for better accuracy based on your style.
  3. Do they work together? Yes, but don’t rely on them blindly. Divergence can signal reversals but isn’t always reliable.
  4. Are they enough? They're a good base, but adding a trend filter (like a moving average) could help.

Keep practicing, and good luck!

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