High reliable divergence methodology of trading

When I was thinking this method I was thinking especially to the lack of discipline of the majority of traders I have been in contact for few years, they had various points of entry but only few and inconsistent exit points. This is a methodology taught and improved for several months, fourteen in number.

Firstly, I have to say the method implies the presence of the divergence on the one of the three indicators: Color stochastic, Moving average of the oscillator and the Commodity channel index. The reason I use three indicators is that, sometimes, on of the indicators doesn't show the divergence after loosing some momentum, after bouncing back from a support/resistance level and I don't need dead times in the market, in other words to waste time.

Secondly, we need a trend line to plot in on the chart and watch for the eventually change in momentum or a reversal in the trend.

The next tool will be a Fibonacci Expansion, a very useful tool for our method for assign the targets of profit. Later on, I will explain the use the use of this tool as I will explain the entries of each kind of situation, regarding the appearance of certain type of divergence, which will trigger a specified quantity of lots.

I will provide few elementary steps in order to enter in a trade, as following:

1.Establishing the highs/lows on which we measure the divergence



2. Measuring if there exist or not a valid divergence and establish the lot size you will trade





I have to mention that, in the case of hidden divergences, which could provide a greater move, the lot will be 10 times bigger than the classic types.

3. Plotting the divergences on highs/lows and the trend line if there exists the divergence



4. Drawing the future next support or resistance with the price level attached to it



5. Establishing the stop-loss which will be under the low or over the high (spread + 1 pip) and plotting the Fibonacci Expansion with the two of the value on the lows/high where we measured the divergence and the other value on the last important high/low



6. Waiting for trend line to be invalidated and entering in the transaction (image 6).



7. Management of the transaction.

When the price hits the first support/resistance on which particular case, the stop loss will be moved in positive area at 1 pip. If the price continues the movement and hits the targets, one by one, on each one of it we will be closing 1/3 of the remaining lot.

Presuming we have a 0.9 lot opened, at Fe 61.8 we'll close 0.3. At the next target price, Fe 100.0, we'll close 0.2 from the remaining lot and so on. If one of the targets is hit and the lot cannot be closed 1/3 (33,3% from it) we can close as much as we can, near 1/3 of it and we'll calculate the difference we couldn't closed it and move the stop loss from +1 pips to cover that difference.

Also, if the target three has been hit and we are still have a remaining lot, let's say 0.1 lot, we switch on a greater time frame, in our case on 4h, because we are on 1h time frame and wait for the same situation to appear, appearance of the divergence and other steps. If the divergence is already there, and the first target price is greater from the 3rd target price from 1h (our case) we'll take it in consideration and will put in on target price, if we cannot close another 1/3 of the transaction.

Also, we will cover the eventual negative swap by moving the stop loss and locking some more profit.

I have provided also, the additional indicators I use to this system and the template file.
The BAT alert, as you already knew, is a horizontal line price alert and the b-clock (h-m-s) it shows the remaining time of the current candlestick.
The other indicators: the osma and cci, exist in each metatrader platform.
Enjoy it.

The pound-yen could possible finished the retrace already. We have a high at 133.21 and as long as that high it's not outdated we are looking for a invalidation of the trend line. If the price will break it we are looking ahead for a support area at the 130.85 level, the last Friday's low, in the presence of the hidden bearish divergence.



If the trend line will be broken and the price doesn't make a new high we'll trigger a short position with these coordinates:

SL: 133.29
MZ: 130.85
1st TP: 124.59 (Fe 61.8)
2nd TP: 119.27 (Fe 100.0)
3rd TP: 110.58 (Fe 161.8)


Abbreviations:

SL - Stop loss
MZ - Management zone
TP - Target price

very nice keep posting

very nice keep posting

I picked up a pair which, in my opinion, it's not very pleased by many traders, because of its range movements - the EUR/CHF.

This pair, although it retraced almost 100% of 1.4209-1.4307, it still could make a continuation of the initial up move.
88.6 Fibonacci level, which has been retraced until now, it's a very tricky level and if the price is breaking below 1.4209 all the bullish scenario collapses and we'll look on this pair from a bearish perspective.



In my opinion this particular case has a high degree of risk, regarding the tough level of the retrace. Even so, will wait for a trend line break and take a long position with the following coordinates (if doesn't make new lows):

SL: 1.4214
MZ: 1.4250
1st TP: 1.4278 (Fe 61.8)
2nd TP: 1.4316 (Fe 100.0)
3rd TP: 1.4375 (Fe 161.8)

Confirmation from the ivalidated trend line, in the presence of hidden bearish divergence, with the coordinates:

Short entry: 112.60
SL: 112.82
MZ: 112.37

1stTP: 111.33
2ndTP: 110.44
3rdTP: 108.96

There is one more chance to enter short if you hadn't time to enter from 30m time-frame (if the current candle breaks the trend line and does not make a new high above 112.77:

If you are a trader who watches more that 2-3 pair and I know from my own experience how hard it is to manage more transactions in real time. So, to ease that, I use the reputed Trailing stop. Presuming my transaction is opened on 1.4035 and the management zone is on 1.4012 level I need a 23 pips on trailing stop to move my stop-loss in positive area. I recommend you to keep the alert sounds enable on the platform to hear whenever the trailing stop is moving, to be aware that one or more positions have been locked in profit and to disable the trailing stop.
Also, I use an expert adviser (it's more like a script to manage my positions) with the specification that you cannot use it properly if you have opened more than one positions on a pair.
Bat alert, which I attached few post ago, it's good for alerting whenever one level has been hit.

The transaction approached the MZ level so I close partial profit and moved the stop loss on +1 pips, to show you how it's working:

The transaction has been closed on +1 pip profit, the price rejected from the support drawn by me. Divergences doesn't guarantee an impulsive move, it can appear false signals which can take us on ruin the account if we are not locking the profit when the price touches sensitive levels and bounce back.

Look what price action just did, after he took my positive stop-loss - it made a fresh high, as you can see in the photo below:



This is one of the main reasons that the implementing of the support/resistance on this strategy it fits like a glove. I will come back with new short oportunities on this pair.

salut!
ai o metoda foarte interesanta.
imi pare bine sa vad romani care fac treaba buna.
succes in continuare.

PS: recent am descoperit ca perechile care contin AUD sunt cele mai interesante, desi pana acum tranzactionam doar pe eurusd.

rygel2001 said:

"hey!
you have a very interesting method.
nice too Romanians which make such a good job.
wish you Godspeed.

PS: recently, I have discovered that pairs which contains AUD currency are more interesting, even tough I was taking transactions only on EUR/USD."

Thank you very much, rygel2001.

This pair made a fresh high at 112.91 and I have modified all the setups from this chart.



In order to open a short position based on the hidden bearish divergence existence, the current candlestick has to close below the close of the prior candlestick (which is on 112.57) and the price not to make a new high above 112.91 (if it does we will change the setup once again). Only then we can trigger a short position with the coordinates, as following:

SL: 112.96
MZ: 112.38

1stTP: 111.47
2ndTP: 110.58
3rdTP: 109.15

Maybe you have been wondering lately what happens if the future support/resistance it's very close to the opening price of the transaction, let's say 7-10 pips and your pair's spread doesn't allow you to move the stop loss to +1 pip? If you did, I want to offer you two options for this particular situation:

1. You can draw a lower/higher support/resistance, depending on what type of move is about to start. If we have a possible downside move, we place a support lower than the previous one.

2. Skip the setup and wait for a better one, if you consider it's a higher degree of risk entering on it.

eurjpy short signal in m15 and m30 from macd, heiken ashi and psar indicators.

EDIT: it seem that all jpy pairs are on sell

The pair almost confirmed the Short entry setup, only few minutes it's separating us from a new transaction. I draw the new additional management zones, noted (1stMZ, etc)



The coordinates for the setup are:

SL: 112.96
1stMZ: 112.38 (which will be no longer available if the candlesticks closes near it, with few pips difference)
2ndMZ: 112.10 (+1 pip SL) or
3rdMZ: 111.87 (+1 pip SL)

1stTP: 111.47 (1/3 partial close)
2ndTP: 110.58 (1/3 partial close)
3rdTP: 109.15 (1/3 partial close)

I was always taught to take the trade in trhe direction of the macd when you have divergence , but you do other wise , please explain , thank you. I do believe divergence is a very reliable tool.

Please be more specified and attach an image. I am not using macd for divergences, I don't consider it eligible to profit from it, in the intra-day time-periods. Maybe on a daily and upper time-frames, but intra-day - evidently not.
Thank you.