Islander and Medici trade the European open | Page 140 | Forex Factory

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Islander and Medici trade the European open

  • #2,781
  • Sep 3, 2010 6:13am Sep 3, 2010 6:13am
Hi Everyone, I don't post much but just wanted to say thank you and offer my support for this thread, I have been lurking for the past couple of weeks and am learning every day.

I also had some questions about choosing the peaks/troughs for checking divergence on. How many peaks back would you consider looking for divergence on? Would the number change depending on the type of divergence being looked for? Would the peaks need to be above a certain level (E.g. > 50)?
  • #2,782
  • Sep 3, 2010 6:25am Sep 3, 2010 6:25am
Quoting medici
Can't wait...will be interesting after all the positive US data. And ADP was spot on, so something similar to or better than forecast and there will probably be a nice rally. TWT.

Another question - you must be very patient btw! - do you trade the news release? For example, this morning, there was divergence on the 5 minute chart just prior to the PMS numbers. Would you have opened a position at that time?
  • #2,783
  • Sep 3, 2010 7:13am Sep 3, 2010 7:13am
Quoting Mr.White
Hi Everyone, I don't post much but just wanted to say thank you and offer my support for this thread, I have been lurking for the past couple of weeks and am learning every day.

I also had some questions about choosing the peaks/troughs for checking divergence on. How many peaks back would you consider looking for divergence on? Would the number change depending on the type of divergence being looked for? Would the peaks need to be above a certain level (E.g. > 50)?
Cordially welcome the the community here!

I hope I am not being rude if I refer you to the BabyPips article posted yesterday. It si explained there, or rather on one of the pages linked to at the bottom of that page. If that not explains it, join the discussion here by posting some specific questions/charts.

As to levels, CI is not normalised, so you don't need to think about the numerical value . but it does form support and resistance levels which are good to keep an eye on.
  • #2,784
  • Sep 3, 2010 7:47am Sep 3, 2010 7:47am
I have read the babypips among other articles already, I guess I was asking more from a programmatic point of view. I am a programmer and have been trying to create a good divergence indicator based on CI, however I am unsure on how many peaks/troughs back to allow divergence checking to take place.

Most of the setups you have posted seem to have been classic divergence on peaks/troughs formed next to each other, is this a general rule or are you taking what appear to be the most significant tops/bottoms only, regardless of their sequential position?
  • #2,785
  • Sep 3, 2010 7:55am Sep 3, 2010 7:55am
Guys I respect say max 3. I've also had it mentioned that you can have a lower wave (in move up) as it were. I couldn't find a good example but imagine the arrow up middle wave is lower than both the left and right wave. As long as right wave is lower than left wave thats the main issue.

Anyway to answer your question I've always done 2 max 3 waves.
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  • #2,786
  • Sep 3, 2010 8:15am Sep 3, 2010 8:15am
http://dl.dropbox.com/u/5321728/GBPJ...M%20030910.jpg

Would you say the bullish divergence shown in the above screeny (GBPJPY 5M) would have been valid or not? My view is 'yes' but obviously a bit influenced by the nice entry right before NFP it gives.
  • #2,787
  • Sep 3, 2010 8:28am Sep 3, 2010 8:28am
Quoting Mr.White
http://dl.dropbox.com/u/5321728/GBPJ...M%20030910.jpg

Would you say the bullish divergence shown in the above screeny (GBPJPY 5M) would have been valid or not? My view is 'yes' but obviously a bit influenced by the nice entry right before NFP it gives.
I'd say no on the lines you've drawn. There is valid divergence from the x and the CII low which occurred 5 candles left of x. IMHO.
  • #2,788
  • Sep 3, 2010 9:47am Sep 3, 2010 9:47am
Quoting Delite
Another question - you must be very patient btw! - do you trade the news release? For example, this morning, there was divergence on the 5 minute chart just prior to the PMS numbers. Would you have opened a position at that time?
In the morning in general, yes, but would be wary of betting on uncertain numbers. This morning PA pointed towards a pre-news fake-out for a sell with the news, and I was about to enter short when it dropped....data out a couple of minutes early...

The NY session news is a different ball game, so usually traded on reaction after the news. A separate chapter not quite in line with the topic of the thread.
  • #2,789
  • Edited 10:14am Sep 3, 2010 10:01am | Edited 10:14am
Quoting Mr.White
I have read the babypips among other articles already, I guess I was asking more from a programmatic point of view. I am a programmer and have been trying to create a good divergence indicator based on CI, however I am unsure on how many peaks/troughs back to allow divergence checking to take place.

Most of the setups you have posted seem to have been classic divergence on peaks/troughs formed next to each other, is this a general rule or are you taking what appear to be the most significant tops/bottoms only, regardless of their sequential...
Oh, I see. Apologies then for sending you to the baby site.

I fully concur with V's comments. When it comes to the programming, remember that CI only takes the last 14+9=23 bars (i.e. about two hours on M5 and six on M15) into account, so anything before that would perhaps be less relevant from a programming perspective.
  • #2,790
  • Sep 3, 2010 10:36am Sep 3, 2010 10:36am
Quoting medici
In the morning in general, yes, but would be wary of betting on uncertain numbers. This morning PA pointed towards a pre-news fake-out for a sell with the news, and I was about to enter short when it dropped....data out a couple of minutes early...

The NY session news is a different ball game, so usually traded on reaction after the news. A separate chapter not quite in line with the topic of the thread.

Thanks for the reply - and apologies for taking us o/t.

Have a great weekend!
  • #2,791
  • Sep 3, 2010 10:39am Sep 3, 2010 10:39am
Quoting Delite
Thanks for the reply - and apologies for taking us o/t.

Have a great weekend!
No problem with the o/t thing. Would be happy to talk about that, but it would lead us far down a different route than what seems to be the reason most people like the thread.

You have a good weekend, too! I'm seriously tired after very long days this week. Promise to self is to only trade the morning session. Hopefully I will get there...
  • #2,792
  • Edited 6:23pm Sep 3, 2010 6:11pm | Edited 6:23pm
It is post-NFP weekend - a good time to make medium term forecasts and, why not, make projections for the coming month. So what do the charts tell us about the month ahead?

The daily view for the Euro is that CI is at resistance and there is bearish divergence indicating a continuation of the downtrend.

The daily view for Euro-Sterling is identical and in addition price is at the upper Bollinger Band, and the daily rarely spends long time outside them. A clear indication that a continuation down could be expected.

The hypothetical conclusion from this would be that the Euro could be ready for another leg of the down-trend and, taking Euro-Sterling into account, that during that drop the Euro would fall more than Cable.

To get an idea of levels we take a look at the H4 chart, which also shows bearish divergence giving further support for the hypothesis. The 50% level of the drop since last NFP comes in at 1.2960 and the charts indicate resistance around 1.2990 - also the 23.6% level of the range from the June lows. Above that there is a Fibonacci confluence area around 1.3050. On the downside the 23.6% level of the last leg of the uptrend comes in around 1.2440 in confluence with levels from the June lows.

So the monthly projection would be that the Euro peaks in the 1.2960-90 area and heads for 1.2440. This scenario would be invalidated if price breaks above 1.3050.

Let's see in a month how it turned out!
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  • #2,793
  • Sep 4, 2010 7:22am Sep 4, 2010 7:22am
Hi people,
Just trying to get handle on divergence from traders with a lot more experience.
Both the entries seem valid to me. Red arrows. Green vertical line is confirmation that divergence has occurred. Entry on the open of next bar. The first had a 20 pip drawdown. Is there a reason not to take the first divergence.
Is it more valid to use extremes of BB as divergence points on CII?
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We all see the same dream, just from different viewpoints
  • #2,794
  • Edited 8:07am Sep 4, 2010 7:55am | Edited 8:07am
Quoting Ironbark
Hi people,
Just trying to get handle on divergence from traders with a lot more experience.
Both the entries seem valid to me. Red arrows. Green vertical line is confirmation that divergence has occurred. Entry on the open of next bar. The first had a 20 pip drawdown. Is there a reason not to take the first divergence.
Is it more valid to use extremes of BB as divergence points on CII?
Both valid divergences, but the first one is counter-trend (see slope of SMA20), so you shouldn't hope for much more than ten pips if you enter from the low. So entry on open of next candle wouldn't always be the proper entry technique.

In general I use pre-identified levels, in this case the Fibonacci levels of the Asian session, or flattening BBs, as further confirmation of entry.

Another approach would be to use only M15 divergences, which have higher probability and profit potential. And the divergence trade would then, in this case, be with the trend.
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  • #2,795
  • Edited 3:32pm Sep 4, 2010 8:14am | Edited 3:32pm
Hi Ironbark
You got an excellent answer from medici...as always.
Just my 2c ...and some observations
I am also learning how to use divergence. It takes time , experience and lot of screen hours.
On insight it's very simple to give an answer .
You may want to look for confluence on your entries.
I think the more arguments you add for entering a trade it will increase your chances.
IMHO ,looking only for divergence in many cases will be not enough .
You may want to consider adding :
- S/R levels
- Fibo studies as medici pointed
- Pivots
- Round numbers
- adding an other BB with 3 SD (standard deviation)
At point c , you would have found confluence of :
- S/R level around 107.70
- point c is 61.8% ret of a-b
- price pinching 3sd
Look at point m :
- you have again a 3sd event
- reversal pattern (shooting star)
- point m is just a couple of pips from Ret Ext 127.2 of t-c
Hope it helps



Quoting Ironbark
Hi people,
Just trying to get handle on divergence from traders with a lot more experience.
Both the entries seem valid to me. Red arrows. Green vertical line is confirmation that divergence has occurred. Entry on the open of next bar. The first had a 20 pip drawdown. Is there a reason not to take the first divergence.
Is it more valid to use extremes of BB as divergence points on CII?
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  • #2,796
  • Edited 7:57am Sep 5, 2010 4:04am | Edited 7:57am
It is interesting, in relation to the The Month Ahead post above, that when the charts say "Time for a continuation down" the news items start to appear:

http://www.businessweek.com/ap/finan.../D9I173V01.htm

Amazing little piece, that one.
  • #2,797
  • Sep 5, 2010 12:04pm Sep 5, 2010 12:04pm
Here's a question that you may want to reflect upon:

What is wrong with the statement 'I can see everything I need from my charts'?

Don't get me wrong, the answer has nothing to do with dissing funnymentals and news. We don't care about those. Rather, the answer is related to the answer to the question

How is it that human traders can be hugely profitable but algos (i.e. EAs and the like) have a harder time?

And, no, it's not about refined intuition or subjective judgement. There's an objective answer that has very much to do with what we are doing here.
  • #2,798
  • Sep 5, 2010 2:06pm Sep 5, 2010 2:06pm
Hey there everyone.
I have had a bad past 3days, so I thought of changing my rules alittle.
Ok I trade 15min charts, so if anyone can find any meaning to it, then goodluck hope my little input helps alittle.
I will also add thanks for the thread it really has been a helpful tool.

Ok I trade Franky, London and New York open, my rules are the following:

Frankfurt open:

  1. Trade hidden divergence only if price is not pushed to round number.
  2. Only take normal divergence id price has been pushed to round number.


London open:

  1. If no hidden divergence took place at Frankfurt, you will now be looking to take a trade with normal divergence.
  2. You can still also take hidden divergence.


New York open:

  1. If extended move took place before NY open you would want to look rather for hidden divergence, the reason is you want a nice retracment for trend to go on.
  2. If extended move you will only take normal divergence if price has been pushed to a round number when NY session opened.
  3. If extended move took place and price was pushed to round number before NY session opened you will then have to wait for hidden divergence to form to effectively counter trend trade, basically you will want to trade double tops or bottoms with hidden divergence.
  4. In a wide ranging day you will be able to look for normal divergence.


Ok these are my basic rules, obv it wont always happen perfectly like that els everyone would have had billions within the first year of trading.
I will now follow with charts explaining the rules.

  • #2,799
  • Sep 5, 2010 2:14pm Sep 5, 2010 2:14pm
Quoting medici
Both valid divergences, but the first one is counter-trend (see slope of SMA20), so you shouldn't hope for much more than ten pips if you enter from the low. So entry on open of next candle wouldn't always be the proper entry technique.

In general I use pre-identified levels, in this case the Fibonacci levels of the Asian session, or flattening BBs, as further confirmation of entry.

Another approach would be to use only M15 divergences, which have higher probability and profit potential. And the divergence trade would then, in this case, be...
I like your trading style, very clean.

I want to ask you, what could be "the situation" on the chart, that alert you to analyze a possibile divergence ? I mean your looking for a divergence after an overbought / oversold situation, after news, patterns (head & shoulders), hammer, breakouts ?

Thank you
  • #2,800
  • Sep 5, 2010 2:17pm Sep 5, 2010 2:17pm
Ok frankfurt open and london.
Eu1 i should not take tht divergence because it was not pushd to round number and it also did not form hidden divergence so it might very well form a fake out which it did, now tht london opend now i can look for divergence, it formd divergence after london opend and i took it.

Eu hidden divergence formd in franky so tht was a good trade.
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