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Pair Divergence Method

  • #581
  • Oct 1, 2009 10:54am Oct 1, 2009 10:54am
Luckily for me the trade is moving in my favor anyway LOL. My aggressive stop management has moved the stop to breakeven so at least I'm not worried about it now.

I'll start waiting for the close and see how it goes. It makes sense since it improves your odds for a successful trade. The downside is you get in later, but hey this is trading.
You are in a maze of twisty little passages, all alike.
  • #582
  • Oct 1, 2009 10:56am Oct 1, 2009 10:56am
Quoting billbss
Also, the trade you entered ended in a long bar- it was about twice the range of the 14ATR.
I enter trades like that but I do it at a reduced lot size. They almost always retrace.
This one looks good so far.
Which part is the "long bar"?
You are in a maze of twisty little passages, all alike.
  • #583
  • Oct 1, 2009 11:05am Oct 1, 2009 11:05am
Quoting stevegee58
Which part is the "long bar"?

The bar that should have been the entrance bar. The one after the last peak of the divergence.
  • #584
  • Edited Oct 2, 2009 8:52am Oct 1, 2009 12:20pm | Edited Oct 2, 2009 8:52am
Here's an interesting situation:

Divergence leads to a sell on E/U 30m (first attachment), then an hour later, you get a sell on the U/C 1h (second attachment). If you had taken both trades, would you have prematurely closed the E/U once you took the U/C trade, or just let them both run their course?

edit: these might have been a bit of a wild ride, but they both closed out in 2X ATR profit.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: eurusd_sell_200910011700.gif Size: 19 KB
Click to Enlarge Name: usdchr_sell_200910011800.gif Size: 17 KB
Hindsight is 20/20
  • #585
  • Oct 1, 2009 12:38pm Oct 1, 2009 12:38pm
Quoting cosgrove
Here's an interesting situation:

Divergence leads to a sell on E/U 30m (first attachment), then an hour later, you get a sell on the U/C 1h (second attachment). If you had taken both trades, would you have prematurely closed the E/U once you took the U/C trade, or just let them both run their course?

Both of those are sell signals for the same pair- the aqua line- I presume that is EURUSD.
  • #586
  • Oct 1, 2009 12:40pm Oct 1, 2009 12:40pm
They both look like EU sells to me too.
You are in a maze of twisty little passages, all alike.
  • #587
  • Oct 1, 2009 1:37pm Oct 1, 2009 1:37pm
Quoting billbss
Both of those are sell signals for the same pair- the aqua line- I presume that is EURUSD.
Sorry if I've confused you guys with my color schemes, but they are indeed two different pairs. The first chart is a 30m euro chart with U/C overlayed, and the second chart is a 1h swiss chart with E/U overlayed. Check the top left of the charts. The aqua lines are the MAs, and the purple and red lines are the overlays.
Hindsight is 20/20
  • #588
  • Oct 1, 2009 2:38pm Oct 1, 2009 2:38pm
Finally got out at +20 pips on that trade. I tightened up the stop and was stopped out finally.
You are in a maze of twisty little passages, all alike.
  • #589
  • Oct 1, 2009 3:56pm Oct 1, 2009 3:56pm
Another one. This time the bar after the rightmost valley had closed.
Attached Image (click to enlarge)
Click to Enlarge Name: divergence.png Size: 13 KB
You are in a maze of twisty little passages, all alike.
  • #590
  • Oct 1, 2009 5:55pm Oct 1, 2009 5:55pm
Quoting stevegee58
Another one. This time the bar after the rightmost valley had closed.
Hi stevegee,

What indicator do you use? Mine OverLayChartLine tells me the setup is not valid because the bottom of valleys are not lined up. But it seems to be valid for you. Thanks.

http://i33.tinypic.com/2is1u1.gif
  • #591
  • Oct 1, 2009 6:11pm Oct 1, 2009 6:11pm
Quoting chamane
Hi stevegee,

What indicator do you use? Mine OverLayChartLine tells me the setup is not valid because the bottom of valleys are not lined up. But it seems to be valid for you. Thanks.
Same indicator as you OverLayChartLINE. I guess you're right that the valleys don't line up exactly. Maybe it wasn't a good trade. The EA couldn't find it either.
You are in a maze of twisty little passages, all alike.
  • #592
  • Oct 1, 2009 6:26pm Oct 1, 2009 6:26pm
Quoting stevegee58
Same indicator as you OverLayChartLINE. I guess you're right that the valleys don't line up exactly. Maybe it wasn't a good trade. The EA couldn't find it either.
It's a very close call. Playing around with timeframes could help to take a decision. Here's what my vertical bars of my previous picture look like on an 1hr TF. The signal is clear.

http://i36.tinypic.com/2yxlrhs.gif
  • #593
  • Oct 1, 2009 6:30pm Oct 1, 2009 6:30pm
I'm trading this strategy with real money, but with micro-lots. I hate paper trading and learn better if I have real money on the line, even if it's only 50 cents LOL. In the higher timeframes, the ATR is of course much larger so my max risk is bigger than my tolerance in this learning phase. I've been only taking signals off the M15.

I still look for signals on the higher timeframes, but don't trade them.
You are in a maze of twisty little passages, all alike.
  • #594
  • Oct 2, 2009 9:44am Oct 2, 2009 9:44am
U/C sell (first attachment) appeared on the 30m before the huge bar today on the 1h (second attachment). 30m trade hit profit within half an hour. I think bill would approach the second setup with reduced lot size, which is most likely the prudent thing to do.

Note that since these trades were in the same direction as one of the ones I posted yesterday (you can still see it in the second chart, although the trend lines are messed up) it didn't really matter. Had they been opposite, I might have just closed the previous trade out and not made a new entry.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: usdchf_sell_200910021500.gif Size: 18 KB
Click to Enlarge Name: usdchf_sell_200910021500_2.gif Size: 18 KB
Hindsight is 20/20
  • #595
  • Oct 2, 2009 9:58am Oct 2, 2009 9:58am
Haha. I saw that setup this morning but I was too scared to take it! These MT4 brokers are bandits during NFP.
You are in a maze of twisty little passages, all alike.
  • #596
  • Edited 12:04pm Oct 2, 2009 11:37am | Edited 12:04pm
Ah, I guess I wouldn't know. I only trade on a weekly time frame right now, and my broker is Oanda.

I mean of course I've heard about it; I just don't have first hand experience.
Hindsight is 20/20
  • #597
  • Edited 5:28am Oct 3, 2009 4:57am | Edited 5:28am
Quoting cosgrove
U/C sell (first attachment) appeared on the 30m before the huge bar today on the 1h (second attachment). 30m trade hit profit within half an hour. I think bill would approach the second setup with reduced lot size, which is most likely the prudent thing to do.

Note that since these trades were in the same direction as one of the ones I posted yesterday (you can still see it in the second chart, although the trend lines are messed up) it didn't really matter. Had they been opposite, I might have just closed the previous trade out and not made a...

Hey nice method , i just wanted to ask if you are taking right now Divergence with wiggles in the valleys or not ? because in the chart you have attached there are some wiggles that confused me a little. i read the thread from the beginning and finally catched up with you guys so next week im going to try this on a demo to get a feeling for it.

thx.. and have a good weekend.

/edit i have attached a chart can you please tell me if everything looks fine with the overlaying etc. i made this with sma - 1 typical , just want to get sure that it looks right thanks.

bold`= eurusd

http://img97.imageshack.us/img97/8500/pic10.gif
consistency wins
  • #598
  • Oct 3, 2009 7:10am Oct 3, 2009 7:10am
Quoting iTrader
Hey nice method , i just wanted to ask if you are taking right now Divergence with wiggles in the valleys or not ? because in the chart you have attached there are some wiggles that confused me a little. i read the thread from the beginning and finally catched up with you guys so next week im going to try this on a demo to get a feeling for it.
I asked Bill to clarify on the "in between wiggles" rule a couple of days ago. It really isn't a hard-and-fast rule, it's just to make the divergences easier to see.

If you think about it, if you have a divergence with wiggles in between on one time frame, it'll be a divergence with no wiggles on a higher time frame. Get in the habit of scanning the M15 through H4 time frames regularly to get a feel for it.

This takes lots of screen time.
You are in a maze of twisty little passages, all alike.
  • #599
  • Oct 4, 2009 6:25am Oct 4, 2009 6:25am
Hey Bill, I can't think of a reason why this wouldn't work with other correlated markets. For instance ES/YM (index futures), or maybe 2 liquid stocks in the same sector like Exxon and BP.

I put ES and YM on the same chart on Friday to watch them but they're so perfectly correlated that there weren't any divergences.
You are in a maze of twisty little passages, all alike.
  • #600
  • Oct 4, 2009 7:12am Oct 4, 2009 7:12am
Quoting stevegee58
Hey Bill, I can't think of a reason why this wouldn't work with other correlated markets. For instance ES/YM (index futures), or maybe 2 liquid stocks in the same sector like Exxon and BP.

I put ES and YM on the same chart on Friday to watch them but they're so perfectly correlated that there weren't any divergences.

I've never looked at them.
You might try the NASDQ amd mini Russell.
I haven't found any other forex pairs that are correlated enough.

You might also try things like soy beans vs oil vs meal.
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