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Divergences

  • #1
  • First Post: Aug 28, 2007 3:18am Aug 28, 2007 3:18am
I don't trade divergences but they are interesting to confirm a trend change. One in particular which has caught my eye is the daily on GBP/JPY. With a stochastic setting of 8,3,3 there is a considerable discrepancy with what the stochastic is indicating and the price is doing. This is called "hidden bearish divergence. There is a likelihood the price could make new lows.

Any comments on this would be welcome.
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  • #2
  • Aug 28, 2007 4:13am Aug 28, 2007 4:13am
Here are some articles. For those not up on divergences.
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File Type: pdf S And C Hidden Divergence.pdf   245 KB | 1,697 downloads
File Type: pdf S & C - Reverse Divergences and Momentum by Martin Pring.pdf   808 KB | 1,622 downloads
File Type: doc Divergence Chart.doc   109 KB | 927 downloads
  • #3
  • Aug 28, 2007 5:00am Aug 28, 2007 5:00am
Quoting smjones
Here are some articles. For those not up on divergences.
Thank you for posting those articles. I have read them and they are very informative.

I am getting the impression that these are not very reliable indicators and should be used as confirmation of other work. I certainly got my fingers burned the first time I traded a divergence. It did work, and surprisingly well, but not until the price had stopped me out. Too late for me.
Gone to a better place
  • #4
  • Aug 28, 2007 1:46pm Aug 28, 2007 1:46pm
I never bought into the whole indicator divergence thing. A couple of years ago I did some studies on them, scrolling back through many charts and I found them to be very unreliable: half of the time they would fake you out into a losing trade.
  • #5
  • Aug 28, 2007 8:10pm Aug 28, 2007 8:10pm
Quoting smikester
I don't trade divergences but they are interesting to confirm a trend change. One in particular which has caught my eye is the daily on GBP/JPY. With a stochastic setting of 8,3,3 there is a considerable discrepancy with what the stochastic is indicating and the price is doing. This is called "hidden bearish divergence. There is a likelihood the price could make new lows.

Any comments on this would be welcome.
I guess i must be dumb because i see no discrepancy here. When the Stochs are rising the price is rising, when the Stochs peak and turn downward the price peaks at a swing high and turns downward.
  • #6
  • Last Post: Aug 29, 2007 1:33am Aug 29, 2007 1:33am
Quoting WTB
I never bought into the whole indicator divergence thing. A couple of years ago I did some studies on them, scrolling back through many charts and I found them to be very unreliable: half of the time they would fake you out into a losing trade.
Divergence indicators are only a glimpse into the future with some degree of success. Just another tool in your toolbox. It just maybe the only true leading indicator when it works.
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