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Pair Divergence Method

  • #701
  • Oct 26, 2009 6:12am Oct 26, 2009 6:12am
Quoting ItalianSharp
It's about understanding the context in which you take any trade that can make a big difference.
Well said, IS!

Div tells us "where/when", the context (SRs etc) tells us "why". If there is no strong reason (Why), then div (where/when) is less relevant (and more likely to fail).
One Chart is Worth Ten Thousand Words.
  • #702
  • Edited 12:19pm Oct 26, 2009 9:23am | Edited 12:19pm
The trade @17:30 broker time last friday stopped out for a loss before the weekend, and I'm looking into recalculating all of my trade win/loss back test statistics without trading on Friday afternoons/holding over the weekend. If my to-be sleep schedule would mandate that I not be awake at market close, and my broker (still haven't figured out who to go live with yet) did not support closing trades during the weekend, then I would have to close open trades on Fridays before going to sleep.

SO, if I'm going to sleep immediately after trading, then I must close all Friday trades by ~1pm EST.

Sorry if I treat the thread more like a trading journal sometimes

edit: the trade I originally posted in this post wasn't a trade, because one of the swing highs was really 'flat' after rounding off the 6th significant digit on price -- oops!
Hindsight is 20/20
  • #703
  • Oct 26, 2009 11:32am Oct 26, 2009 11:32am
Quoting billbss
Sure.

I've never traded ECN forex, but I have traded futures.
The commission isn't bad but the slippage is very bad.
I suspect you have the same problem with ECN forex.
Bill - surely no slippage trading EC (euro) futures ? I've never not been filled using limit and stop limit oders @ 4 lots ($500k). I understand SF is less liquid, but having looked at it just now, ie. during the more liquid US session, it looks like there's always at least 2 or 3 contracts available with a 1 pip spread, usually more.

I'd also take ECN Forex over a "normal" retail fx broker anyday. Apologies if I'm missing your point.

Anyway, thank-you for this thread which I bookmarked at the outset. I have not followed it closely but I really like the idea, especially using very simple line charts. Thanks .
  • #704
  • Oct 26, 2009 11:53am Oct 26, 2009 11:53am
Quoting jtrade
Bill - surely no slippage trading EC (euro) futures ? I've never not been filled using limit and stop limit oders @ 4 lots ($500k). I understand SF is less liquid, but having looked at it just now, ie. during the more liquid US session, it looks like there's always at least 2 or 3 contracts available with a 1 pip spread, usually more.

I'd also take ECN Forex over a "normal" retail fx broker anyday. Apologies if I'm missing your point.

Anyway, thank-you for this thread which I bookmarked at the outset. I have not followed it closely but I...
I traded mini S&P, mini Russell and mini Dow.
They are more liquid that and other futures I know of.
I don't remember ever being filled on the first thrust on a limit order. Invariably it took one or two excursions to get filled.

I have no idea how ECN forex performs.
  • #705
  • Oct 26, 2009 11:56am Oct 26, 2009 11:56am
Quoting ItalianSharp
Well, trade management only scratches the surface of what I am referring to.

It's about understanding the context in which you take any trade that can make a big difference.

There only are three types of trades that I know of:...
I appreciate your thoughts.
I'm sure the system can be improved on. I've maintained that for a long time.
I have to disagree that S/R is they way to improve it.
  • #706
  • Oct 26, 2009 12:09pm Oct 26, 2009 12:09pm
Quoting billbss
I appreciate your thoughts.
I'm sure the system can be improved on. I've maintained that for a long time.
I have to disagree that S/R is they way to improve it.
Is there any logical reason you don't think S/R levels can provide any help? In your prior posts you claimed that S/R levels can be too subjective and that if you pick 10 different traders, they'll all use different S/R levels. However, don't you think that if you ask the same 10 traders to identify hills/valleys, they'll likely disagree on that as well?

What I am trying to get at is that if you are looking for something that is widely recognized by everyone, then good luck.

Even the most mechanical strategy is very subjective. It may not be subjective in its application, but it's very subjective in its rules.

Perhaps I misunderstood your explanations.

I am looking forward to reading how you believe this can be improved.

IS
  • #707
  • Oct 26, 2009 12:22pm Oct 26, 2009 12:22pm
Quoting ItalianSharp
Is there any logical reason you don't think S/R levels can provide any help?...
Yes I do think S/R levels are too subjective.
No I do not think that recognizing the hills and valleys is subjective, if the rules are followed.

I don't know how else to answer you.
If you want to use S/R - go for it.
I don't.
  • #708
  • Oct 26, 2009 3:53pm Oct 26, 2009 3:53pm
Quoting billbss
I stated a number of pages back that this system, is slightly better than a coin toss. That is, however, significant.
indeed, i am excited and awaken in reading this.

that's like you are hosting a roulette table in fx market. :-)

i'm wondering, if anyone has thought about this:

this divergence will be more significant if the more volatile pair show weakness?

e.g. eurjpy and gbpjpy, eurjpy is LL, but gbpjpy, more frenzy, is NOT making a LL.

Will that make a better divergence for LONG trade?

this actually happened today. let's see if gbpjpy is crazy up tonight/tomorrow. even if it does, this might not be of significance anyway. just my guess.
  • #709
  • Oct 26, 2009 3:58pm Oct 26, 2009 3:58pm
Quoting charvo
indeed, i am excited and awaken in reading this.

that's like you are hosting a roulette table in fx market. :-)

i'm wondering, if anyone has thought about this:

this divergence will be more significant if the more volatile pair show weakness?

e.g. eurjpy and gbpjpy, eurjpy is LL, but gbpjpy, more frenzy, is NOT making a LL.

Will that make a better divergence for LONG trade?

this actually happened today. let's see if gbpjpy is crazy up tonight/tomorrow. even if it does, this might not be of significance anyway. just my guess.
Anything better than a coin toss is profitable, with a 1:1 RR ratio, which this uses.

Roulette isn't better than a coin toss, it's worse.
  • #710
  • Oct 26, 2009 11:35pm Oct 26, 2009 11:35pm
ha, i meant, u r hosting a roulette;

but what do you think of my said "volatile pair making lower high/higher low means more significance for the set-up"?

Quoting billbss
Anything better than a coin toss is profitable, with a 1:1 RR ratio, which this uses.

Roulette isn't better than a coin toss, it's worse.
  • #711
  • Oct 27, 2009 3:30am Oct 27, 2009 3:30am
Quoting charvo
ha, i meant, u r hosting a roulette;

but what do you think of my said "volatile pair making lower high/higher low means more significance for the set-up"?
I don't know. It's worth watching.
  • #712
  • Oct 27, 2009 9:15am Oct 27, 2009 9:15am
Quoting ItalianSharp
Once you develop a way to define/identify S/R levels, I'd recommend you also develop a set of rules to determine whether the market is trending, ranging, or reversing.
i am not an expert neither i trade profitable so maybe i am wrong.

but the point is: billbs showed here, like all threads he participes , a very objetive way to trading. billbs threads are the contrary of the majority of threads here wich are "eye opener" and that the creator of the thread "is on something" and all this bullshit that after 175 pages only two persons were in the first page too. All others were in the beginning broke they account or never found a way to start to trade. This is because if you search for everything you will find nothing.

the approaches used to recognize if price is trending i am aware are or too much subjetive, or too much complex or simple inefficients.

if you use down theory expecting only higher lows to buy you will make 3 trades for year. Same with the 21 bars used by Joe Ross. I doubt a backtest could show this system more profitable using thinks like this with the great reduction of frequency it will cause.

if you use your 5 year soon to recognize if price is trending or not, after 7 losers you will wonder if you zoomed enough to show the chart before request the kid analysis.

another ways i know are very complex like Mark Fisher number line. Quant analysis are difficult to have acess (never found an indicator for this methdo for example) and based a daily tf, so again you will reduce frequency too much.

Cosgrove made a backtest with this system and got something like ~10% montlhy and 67% hit rate. Did you backtest with objective rules and got something much better than it?

you have objetive and well difined rules to use as a filter like billbs gave for the entries i am all ears.

thanks in advance.
  • #713
  • Edited 9:46am Oct 27, 2009 9:32am | Edited 9:46am
Italian Sharp was put on ignore yesterday, so he can't respond.
I did it because I felt he was being argumentative and I didn't have time to argue with him, particularly then.

That's the first time I've ever done that, and I admit, I was too hasty. That should be reserved for name calling and incivility- which he did not do.

Sharp- If you read this, I'm taking you off of ignore. You are free to post here if you want. I apologize for my hastiness.

I won't respond to you, because I have said all I can say on the matter, but you are welcome post if you want.
  • #714
  • Oct 27, 2009 9:43am Oct 27, 2009 9:43am
Quoting charvo
this divergence will be more significant if the more volatile pair show weakness?
I think if you could statistically prove that one pair wins more often (or put another way: divergence on a certain pair of a certain pairing more often than not signals a significant move in a certain direction) than it's counter pair (i.e. if E/U won more than U/C when they were paired looking for divergence), you could exploit the fact. However, my slightly educated guess is that you will probably find in the long run that neither pair "leads" the other, or that if one does, the edge is too small to capitalize on.
Hindsight is 20/20
  • #715
  • Oct 27, 2009 9:51am Oct 27, 2009 9:51am
Quoting giraia_br
Cosgrove made a backtest with this system and got something like ~10% montlhy and 67% hit rate.
Thanks for the mention giraia, but I must update the numbers in an effort to be transparent (no fault of yours, it's been a while since I posted them). I'm seeing more like 60-62% winners now with my subjective ruleset. And again I must make a note that the ~10%/mo. is from risking 3%/trade.

I am about to modify the rules again regarding trading on Fridays, but that will most likely not happen until this weekend.
Hindsight is 20/20
  • #716
  • Oct 27, 2009 10:15am Oct 27, 2009 10:15am
Euro sell for profit this morning. The overlay saw a higher high by 1 pip, but the actual U/C was flat. I am counting the trade anyway, because of it being a more simple analysis to not check the opposite chart.

I may be trading off of "fake" signals, but like rounding off pipettes, I feel any differences in return between the two options would be like splitting hairs and is akin to different broker price feeds showing different signals among traders trading the same system. I feel it will all balance out in the end.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd_sell_200910271415.gif Size: 17 KB
Hindsight is 20/20
  • #717
  • Oct 27, 2009 10:42am Oct 27, 2009 10:42am
Quoting cosgrove
I may be trading off of "fake" signals, but like rounding off pipettes, I feel any differences in return between the two options would be like splitting hairs and is akin to different broker price feeds showing different signals among traders trading the same system. I feel it will all balance out in the end.
another cool entry/trade, this signal is not fake at all. i always feel that when we manually trade, we should not be too 'mechanic'

yesterday, eurusd, and eurjpy presented "waterfall" on daily scale, so at the end of day, you see a weak eur's lower high, that should be a quite vaild signal for sell, just my feeling :-)

btw, Cos, did you enter using a sell-stop at 1.48600 approximately? many thanks.
  • #718
  • Oct 27, 2009 10:56am Oct 27, 2009 10:56am
Quoting charvo
i always feel that when we manually trade, we should not be too 'mechanic'
I tend to agree; however, I feel we need to have some rules so that we do not end up contradicting ourselves or not knowing why we traded a certain way.

Quoting charvo
btw, Cos, did you enter using a sell-stop at 1.48600 approximately? many thanks.
The entry bar closed at 1.4858 on my chart. I guess it's a personal preference as to whether you would enter with a market or limit order. Since I am not taking these signals live yet, I don't know which I would use.
Hindsight is 20/20
  • #719
  • Edited Oct 28, 2009 8:18am Oct 27, 2009 3:52pm | Edited Oct 28, 2009 8:18am
U/C sell during lunch...missed profit by 1 pip so far on my charts, so still open.

edit: this closed for profit
Attached Image (click to enlarge)
Click to Enlarge Name: usdchf_sell_200910271830.gif Size: 16 KB
Hindsight is 20/20
  • #720
  • Oct 27, 2009 3:52pm Oct 27, 2009 3:52pm
take this short on UC (15min) at the open of the highlighted bar:

comments?
Attached Image
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