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Daily Divergent Candles Method

  • #61
  • Oct 8, 2009 12:32pm Oct 8, 2009 12:32pm
Quoting mer071898
Here's my little tweak. I'm a big Murrey Math guy and what I've been looking into is how these Bullish/Bearish Divergent candles react around these levels and I'm trying out a little variation of my own.

When a Bearish or Bullish bar touches or breaks a Murrey level, enter in the same direction of the candle at the open of the next candle, as usual, but use the next Murrey Level as your exit. I know it won't get the whole move, but you can use higher lots around the more overbought/oversold levels and stronger reversal levels and make some serious...
Sinner,
Thank you for sharing your strategy.

Mer071898,
Thank you for your contribution.
Could you please share your template.

Thank you

Alfa99
  • #62
  • Oct 8, 2009 2:26pm Oct 8, 2009 2:26pm
Not a problem, here you go.
Attached File(s)
File Type: tpl 1440 min. divergence.tpl   7 KB | 583 downloads
  • #63
  • Edited Oct 9, 2009 12:16am Oct 8, 2009 2:39pm | Edited Oct 9, 2009 12:16am
Nice thread sinner-

I made an indicator which might be useful. The number of bars to the left can be changed. Default is 5.

It can be used on any time frame.
Attached File(s)
File Type: mq4 #PH#CandleDivergence02.mq4   2 KB | 764 downloads
File Type: ex4 #PH#CandleDivergence02.ex4   3 KB | 558 downloads
  • #64
  • Edited 3:13pm Oct 8, 2009 3:01pm | Edited 3:13pm
The indicator definately will help, but can you make it where the dot doesn't touch the bottom or top of the candle or make an input where we can adjust how far it will be away from it? Also, does the dot appear after the candle changes color or at the end of the candle only?
  • #65
  • Oct 8, 2009 3:10pm Oct 8, 2009 3:10pm
really appreciate the tpl and indicators guys.
  • #66
  • Oct 8, 2009 3:50pm Oct 8, 2009 3:50pm
Quoting mer071898
The indicator definately will help, but can you make it where the dot doesn't touch the bottom or top of the candle or make an input where we can adjust how far it will be away from it? Also, does the dot appear after the candle changes color or at the end of the candle only?
I have added a parameter for the distance to the candle. Default is 20 pips for the daily.
The dot appears as soon as the candle changes color. So if you want to be sure you will have to wait until that bar has been closed.
Attached File(s)
File Type: mq4 #PH#CandleDivergence03.mq4   2 KB | 928 downloads
File Type: ex4 #PH#CandleDivergence03.ex4   3 KB | 639 downloads
  • #67
  • Oct 8, 2009 5:09pm Oct 8, 2009 5:09pm
Quoting mer071898
Not a problem, here you go.
Thank you Mer071898 for the template and
thank you Fewhills for the new indicator.

Alfa99
  • #68
  • Oct 8, 2009 5:31pm Oct 8, 2009 5:31pm
Wow. I am really impressed with the way some of you have taken this and run with it and kept the thread nice and clean.

Maybe I should release more strategies on this forum...
  • #69
  • Oct 9, 2009 12:53pm Oct 9, 2009 12:53pm
i m very happy to read this thread.
keep it up guys

divergent candles
engulfing candles
harami

all those things are proven strong reversal signal & breakout signal
  • #70
  • Oct 12, 2009 10:23am Oct 12, 2009 10:23am
Did the last 4 trades on USDJPY get stopped out?
Looks like a bearish divergent candle developing for tonight.

When you say UC, do you mean UCAD or UChf?
  • #71
  • Edited 11:05am Oct 12, 2009 10:40am | Edited 11:05am
Hi sinner
I don;t know if you like them but I am a big fan of bollinger bands.
If you stick up a 20 period bollinger and use the divergent candles only near the outer edges of the bollinger, you get some high quality trades.
Seems to work best with GBPUSD.

I am going to do an EA backtest in the next few days so can see past results, I'll do one both with and without bollingers.
  • #72
  • Oct 12, 2009 11:33am Oct 12, 2009 11:33am
Quote
Did the last 4 trades on USDJPY get stopped out?
You are always going to have some losses, but you should have made some pips on 4 out of the last 5 trades if you moved your stops after "X" number of pips. Use should never let a trade go negative once you are in profit. Even if you have to close it out with 1 pip profit, that's better than 0!
Attached Image (click to enlarge)
Click to Enlarge Name: trade.gif Size: 58 KB
  • #73
  • Oct 12, 2009 12:27pm Oct 12, 2009 12:27pm
Quoting mer071898
You are always going to have some losses, but you should have made some pips on 4 out of the last 5 trades if you moved your stops after "X" number of pips. Use should never let a trade go negative once you are in profit. Even if you have to close it out with 1 pip profit, that's better than 0!
Do we move the existing trade to breakeven once the other one has hit its TP?
  • #74
  • Edited 2:43pm Oct 12, 2009 2:18pm | Edited 2:43pm
Quote
Do we move the existing trade to breakeven once the other one has hit its TP?
You shouldn't be in more than one trade at a time at the same time unless you get opposing signals together. I use my Stealth EA I posted earlier to move my stop to Breakeven after I'm in profit. Each pair will be different because of the daily range is so vastly different for each pair. On Usd/Jpy I put my breakeven level around 30-35 pips and shift it to lock in 10-15 pips just in case it reverses on me. On the other side of the spectrum, on Gbp/Jpy, I usually have a Breakeven level at 55-60 pips and a shift it to lock in 25-30 pips. You could also put a trailing stop on it as well to catch the bigger runs, but I'm not a greedy trader.

As you can see on Gbp/Jpy that you have more pips available due to the higher volatility and average daily ranges.
Attached Image (click to enlarge)
Click to Enlarge Name: trade.gif Size: 51 KB
  • #75
  • Oct 12, 2009 2:39pm Oct 12, 2009 2:39pm
Quoting mer071898
You shouldn't be in more than one trade at a time.
Read the first post
It seems the main profitability of the system is going for the longer term pips. If you are closing everything out at TP1 then the losing trades will wipe out that profit, no?
If you do some backtests and run 2 trades without moving to breakeven then there are many stop outs.

The key is when to close your trade, just closing at the next signal will not work often enough. All those USDJPY trades under the strat on page 1 would have been stopped out because no opposite signal was given to close the trade even though they all went into profit at some point. The R:R on your chart is less than 1:1 on most of those trades as well.

I'm just discussing...but blindly following divergence candles doesn't seem to be profitable in the long run.
  • #76
  • Oct 12, 2009 2:47pm Oct 12, 2009 2:47pm
Divergent candles are not true trend reversal indications, only to indicate small retracements in the trend. Sometimes they occur at the end of a major trend but the majority do not. So you need to catch the pips as they come and not try and catch every single huge swing, because you won't. Basically I'm scalping the daily is what it comes down to, but that's just the way I do it and not necessarily the way everyone else does it.
  • #77
  • Edited 5:14pm Oct 12, 2009 2:53pm | Edited 5:14pm
Quoting mer071898
Divergent candles are not true trend reversal indications, only to indicate small retracements in the trend. Sometimes they occur at the end of a major trend but the majority do not. So you need to catch the pips as they come and not try and catch every single huge swing, because you won't.
Divergent candles can also come in the guise of reversal candles. For example, a divergent candle that is also a candle with a long wick, that is probably your class A setup.

So, how do we determine when to exit the trade?
That USDJPY chart as an example, if we had taken the most efficient exit then the R:R was less than 1:1, which is not really good unless you can be sure that each andwhen every divergent candle signals some sort of retracement.
1/ The actual exit would not have been that exact so we would have lost out on some pips;
2/ when divergent candles are traded and price subsequently does not move in your direction you will get a bigger loss if R:R is less than 1:1 on the majority of trades.

I ran an initial EA test using the simple rules (page 1) with 2 trades per entry and only GBPUSD shows profitability so far. Whilst I believe the theory to be correct, I don't see how taking every Daily divergent candle will get us profit - trading is not that simple. Something needs to be added to take only the high profitability trades whether that be S&R, bollinger bands, long wicked divergent candles, only trading with the trend, or something else.

Not trying to cause arguments, just trying to point out some possible flaws in what could be a very good strategy with some good discussion. I backtest every new method as far as possible before using it and my first point of interest is failed trades before I even start looking at successful ones.
  • #78
  • Oct 15, 2009 9:39am Oct 15, 2009 9:39am
hi all, this system looks good. will start testing it right away.
it is better to miss than to loss pips
  • #79
  • Oct 15, 2009 6:43pm Oct 15, 2009 6:43pm
Attached Image (click to enlarge)
Click to Enlarge Name: gbp4hrs.gif Size: 17 KB

I believe adding a little filter can make this a lot more profitable. Looking at the attached image, we have two EMAs; 12 & 25 . We only take signals in agreement with the two EMAs.
On the 4Hr chart above, all sell signals(red dot) when the candle closes below both EMAs (or 12 EMA lower than 25 EMA) proved to be successful; in contrast, the buy signals(blue dot) with the EMAs on the wrong side turned out to be losses.
If someone would be kind enough to adjust the EA posted in the earlier pages of this thread we can try and fine-tune this system.

Recommendations:

1) Sell : only if signal candle closes below 12 EMA, or 12 EMA < 25 EMA- vice versa for buy.

2) MM : Close one lot and move to BE at 1:1 or after some pips, and the other lot trailed till stopped out.
  • #80
  • Oct 15, 2009 6:45pm Oct 15, 2009 6:45pm
Quoting SanMiguel
Divergent candles can also come in the guise of reversal candles. For example, a divergent candle that is also a candle with a long wick, that is probably your class A setup.

So, how do we determine when to exit the trade?
That USDJPY chart as an example, if we had taken the most efficient exit then the R:R was less than 1:1, which is not really good unless you can be sure that each andwhen every divergent candle signals some sort of retracement.
1/ The actual exit would not have been that exact so we would have lost out on some pips;
2/ when...
I am not sure you understand...
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