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EASY H1 trading using divergence and candle sticks

  • #321
  • Apr 13, 2012 7:01am Apr 13, 2012 7:01am
Good point Gez.


Hi Pure Price,


It will be great to have your take on the oscillator settings and price parameters.

If I have oscillator set to low high, then do i draw the line on the Price action to low high? If I have the oscillator to close, then do i draw the line on the price action from close to close?

Great to hear from you, pure price.

thanks
  • #322
  • Apr 13, 2012 7:06am Apr 13, 2012 7:06am
Hi Julie,

You made a good point and I cannot resist replying.

Any change in price action should be reflected by the oscillator accordingly. If price makes new high, oscillator should.

If oscillator does not reflect price action, it is divergence. The oscillator is diverging from what price is saying.

Oscillator does not necessarily have to show the opposite, but as long as it does not agree with the price action, it is divergence.

If RSI is flat, and price has made new highs, it is divergence.

All this are my opinion, I am willing to learn from Pure Price if it is anything different. He is a better trader than me.

thanks
  • #323
  • Apr 13, 2012 7:55am Apr 13, 2012 7:55am
Quoting gez40
Divergence is a great leading indicator if used correctly, but i`ve noticed most people read the oscillators wrong..

If your oscillator is set to "close" then you must measure the closing price of the bar not the high/low of the bar.

Easy mistake, done loads myself. Hope that makes sense.
Switching to line chart could eliminate this mistake as it shows the closing price, not great for entries though.
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Seek not to change the world; seek only to change your mind about the world
  • #324
  • Apr 14, 2012 3:38pm Apr 14, 2012 3:38pm
Hi guys,

I had a very good first week of live trading last week using this strategy as my sole criteria for trading.

Some lessons learned:
I made 1 losing trade on the GBPUSD on Wednesday this week. In hindsight it was not a good trade to take - the entry was right on a strong, longstanding and many times respected support/resistance level going back over the last week or 2. My take profit would have required it to break that line and the momentum just wasn't strong enough for that.

New personal rule: no entering trades that depend on the breaking of existing support/resistance to hit TP1.

I am currently trading at 4% risk per trade, it is a small account and losses do not worry me, as long as the strategy is sound long term. The other thing that came back to bite me was the way I placed my orders. I set 2 sell limit orders each at 2% account risk, TP1 was equal to SL, TP2 was equal to SLx2. TP1 worked well every time, it got hit, made me money, the end. TP2 is troublesome. I set a trailing stop equal to the amount of pips of the SL, so that as the order moved to profit I locked in a positive return. The problem was that in the course of trying to close at TP2 there was always enough volatility or uncertainty to hit the trailing stop and take a smaller than TP1 level profit.

What I would love to be able to do is set an order so that once TP1 is hit, stop loss moves to breakeven, but as soon as the order clears TP1, the stop is set to TP1. Basically guaranteeing that from that point on no matter what, I've locked in TP1 on both orders.

Until I can work this out I think I will stick to placing 1 order and using TP1 as the profit target. I'm not worried about getting a little extra on reversals that take off, I'd much rather lock in 4% per trade.

TL;DR: This week I will be using a single 1:1 R:R ratio as it would have locked in more profit for me last week.

Thanks very much for all of your ongoing discussion, happy trading for the week ahead.
  • #325
  • Apr 14, 2012 4:28pm Apr 14, 2012 4:28pm
Vixs, I have been using 1:1 from the very beginning for the very reason you state. With 1-hour charts, most often you are going to get enough bouncing around that it will be difficult to regularly get a TP2. And this ends up actually hurting your R:R. I feel it is better to get the quick TP1 and lock in your full percentage gain. As long as your win/loss rate is at least 50%, you're golden.

Probably ill advised, but I went straight to live trading on this method with my first trade. After two weeks, I have a positive return overall. Hopefully can keep it going and refine my entries a bit better.

Scott

Quoting Vixs
Hi guys,

I had a very good first week of live trading last week using this strategy as my sole criteria for trading.

Some lessons learned:
I made 1 losing trade on the GBPUSD on Wednesday this week. In hindsight it was not a good trade to take - the entry was right on a strong, longstanding and many times respected support/resistance level going back over the last week or 2. My take profit would have required it to break that line and the momentum just wasn't strong enough for that.

New personal rule: no entering trades that depend on the breaking...
Prices are never too high to begin buying or too low to begin selling.
  • #326
  • Apr 14, 2012 4:31pm Apr 14, 2012 4:31pm
This is an excellent point and something I thought about a few days ago though I had not yet implemented any changes. I think this coming week I will pay attention to this. Thanks, gez.

Scott

Quoting gez40
Divergence is a great leading indicator if used correctly, but i`ve noticed most people read the oscillators wrong..

If your oscillator is set to "close" then you must measure the closing price of the bar not the high/low of the bar.

Easy mistake, done loads myself. Hope that makes sense.
Prices are never too high to begin buying or too low to begin selling.
  • #327
  • Apr 14, 2012 7:44pm Apr 14, 2012 7:44pm
Quoting thehenryfam
Vixs, I have been using 1:1 from the very beginning for the very reason you state. With 1-hour charts, most often you are going to get enough bouncing around that it will be difficult to regularly get a TP2. And this ends up actually hurting your R:R. I feel it is better to get the quick TP1 and lock in your full percentage gain. As long as your win/loss rate is at least 50%, you're golden.

Probably ill advised, but I went straight to live trading on this method with my first trade. After two weeks, I have a positive return overall. Hopefully can...
Thanks for your response Scott. Hopefully next week will see enough solid trading opportunities for some double digit growth.

I've just got to not get excited everytime I identify a divergence, as there is often not a reversal indicator that follows it.

How many bars after your 'divergence' do you wait for a reversal indicator before you cancel it as an invalid trade? Personally I'm happy to wait a couple of bars (though ideally the immediate bar following the new high/lower high or new low/higher/low indicates a reversal) but at some point I just have to look at it and go 'nope, this isn't valid anymore' and walk away.
  • #328
  • Apr 14, 2012 8:01pm Apr 14, 2012 8:01pm
I think someone asked Pure Price about that earlier, and he mentioned that the signal is probably valid for 3-4 bars but after that, one should move on to another trade possibility. Obviously discretion and experience come into play in that case. I am much more likely to keep looking for the breakout if the immediately following bars are inside bars or similar.

Scott

Quoting Vixs
How many bars after your 'divergence' do you wait for a reversal indicator before you cancel it as an invalid trade? Personally I'm happy to wait a couple of bars (though ideally the immediate bar following the new high/lower high or new low/higher/low indicates a reversal) but at some point I just have to look at it and go 'nope, this isn't valid anymore' and walk away.
Prices are never too high to begin buying or too low to begin selling.
  • #329
  • Apr 14, 2012 10:04pm Apr 14, 2012 10:04pm
Yeah, if the trend has lost momentum but hasn't indicated a reversal I stay with it. If it has shown signs of continuing I discard it. I'm in the process of reading the rest of this thread at the moment so I'm sure I'll pick up some insight.

Cheers,
Vixs
  • #330
  • Apr 14, 2012 11:59pm Apr 14, 2012 11:59pm
Quoting Vixs
Hi guys,

I had a very good first week of live trading last week using this strategy as my sole criteria for trading.


What I would love to be able to do is set an order so that once TP1 is hit, stop loss moves to breakeven, but as soon as the order clears TP1, the stop is set to TP1. Basically guaranteeing that from that point on no matter what, I've locked in TP1 on both orders.
I use MYFX for trade management and would not be without it. I paid for the first years license but since then my account with my broker (GO) allows me a free license, they do have arrangements with a quite few brokers.

Anyway MyFx allows me to manage the trade so easily and set tp targets, stop loss moves, trailing, etc etc all with a few easy clicks. It runs outside of Mt4 as a separate interface so is not an ea as such and must have mt4 and MYFx to be running on your pc to function properly. But it is excellent tool for trade management of the kind you are looking for.

An example of a trade, once entered say 0.03 micro lots - with default sl at 30 pips and tp at 50 i then click manage trade,
tp1 0.01 - 20 pips,
tp2 0.01 - 40 pips,
tp2 0.01 - 60 pips
set break even at 20 pips,
move sl to 25 pips behind market price at 30 pips

or whatever you think is good for that trade.
can then walk away from the trade and let it play out.

I use pivots as tp points, sl is preferably just behind previous pivot level and signal candle, move sl once its cleared next pivot level. using pivots we can see exactly where to place tp and sl orders.

I find execution to be very fast, faster than i could do it myself by far, so if price just touches a level for a second it takes the profit and moves the stop so if we get a significant bounce off a pivot as often occurs you have locked in profit.

Regards,
Julie
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  • #331
  • Apr 15, 2012 1:28am Apr 15, 2012 1:28am
Quoting thehenryfam
Vixs, I have been using 1:1 from the very beginning for the very reason you state. With 1-hour charts, most often you are going to get enough bouncing around that it will be difficult to regularly get a TP2. And this ends up actually hurting your R:R. I feel it is better to get the quick TP1 and lock in your full percentage gain. As long as your win/loss rate is at least 50%, you're golden.


Scott
Quoting Vixs
Hi guys,


Until I can work this out I think I will stick to placing 1 order and using TP1 as the profit target. I'm not worried about getting a little extra on reversals that take off, I'd much rather lock in 4% per trade.
Hi,

with regards to tp targets and split profit taking, I agree its a very thin line and very debatable whether to take profit on full lots or split and let run, I vacilate between both options regularly. So i am going to assess some of last weeks trades to see how they would have performed with each method. Just finished EURUSD.

based on entry at 0.03 lots
Trade 1 tp1 - 30 pips
Trade 2 tp1 - 20 pips
Trade 3 tp1 - 20 pips
Trade 4 tp1 - 30 pips

equals 100 pips at 0.03 lots = $30.

or with tp targets at pivots and moving sl to each pivot once confirmed break and previous tp taken.
same 0.03 lots, tp = 0.01 each time.
Trade 1
tp1 - 30, tp2 - 50, tp3 - 30 = $11
Trade 2
tp1 - 20, tp2 - 40, tp3 - 20 = $8
Trade 3
tp1 - 20, tp2 - 40, tp3 - 20 = $8
Trade 4
tp1 - 30, tp2 - 0, tp3 - 0 = $3

Total = $30
lol exactly the same,

Ok so results would only have been more if we moved the sl to 10 pips behind or in front of pivot so as not to be knocked out during a retrace back to pivot.

Trade 1
tp1 - 30, tp2 - 50, tp3 - 20 = $10
Trade 2
tp1 - 20, tp2 - 40, tp3 - 10 = $7
Trade 3
tp1 - 20, tp2 - 40, tp3 - 10 = $7
Trade 4
tp1 - 30, tp2 - 50, tp3 - 80 = $16

Total = $40

So result is if there is a trade where it runs significantly we would be in front, but is it worth the hassle, each to his own I guess,

Please note pips rounded to nearest pivot for ease of maths, not allowing for spread costs, slippage, late or early entries etc etc. Theoretical only.

Regards,
Julie
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  • #332
  • Apr 15, 2012 3:19am Apr 15, 2012 3:19am
Hi again, here's my assessment for GBPUSD take profit at tp1 or split and let run.

based on entry at 0.03 lots
Trade 1 tp1 - 30 pips = $9
Trade 2 tp1 - stopped - (-30) = -$9
Trade 3 tp1 - 20 pips = $6
Trade 4 tp1 - 20 pips = $6

Total = 40 pips x 0.03 lots = $12

or with tp targets at pivots and moving sl to each pivot once confirmed break and previous tp taken.
same 0.03 lots, tp = 0.01 each time.
Trade 1
tp1 - 30, tp2 - 45, tp3 - 60 = $13.50
Trade 2
tp1 - (-30) = -$9
Trade 3
tp1 - 20, tp2 - 35, tp3 - 20 = $7.50
Trade 4
tp1 - 20, tp2 - 20 - $4

Total = $16

So a little more profit in this case with split profit taking. Trade 1 actually went for over 100 pips before returning to daily pivot, but I don't use trailing.

Trade 4 technically not really divergence if using gez info of only use close price for candle, but I thought it looked ok for a quickie.

Going to look into theories of close vs high/low for divergence next. I did find one website which says flatline divergence is not as strong as angled divergence. Strongest indication is if price and rsi is angled opposite to each other. Which would make sense to me.

Trade 2 price was flat using close and it didn't follow through so there may be something in that theory.

Regards,
Julie
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  • #333
  • Apr 15, 2012 8:17am Apr 15, 2012 8:17am
Thanks for the info on MyFX Manager, I'll look into that tomorrow (time for some sleep now).

I wouldn't mind the in-trade management at all except that the duration of these trades means that usually some are still playing out while I'm at work and it just isn't practical to micromanage the trades with my phone while I'm working.

Goal for this week is 4 days worth of trading this strategy using a 1:1 RR ratio and seeing what results I come out with. Then I can analyse which trades would have benefited from letting some profits run.

Fingers crossed for many fat divergences this week.

Vixs
  • #334
  • Apr 15, 2012 11:50am Apr 15, 2012 11:50am
You have some very good trades there, well done!

Actually, right now I'm using RSI divergence to exit trades. They usually come on a very good timing, without too early or too late exits.
  • #335
  • Apr 15, 2012 3:33pm Apr 15, 2012 3:33pm
Interesting idea. Are you still keeping your stoploss at the other end of the signal bar or is your SL even dictated by the reverse divergence?

How have you found your R:R doing it that way?

Scott

Quoting tracer
You have some very good trades there, well done!

Actually, right now I'm using RSI divergence to exit trades. They usually come on a very good timing, without too early or too late exits.
Prices are never too high to begin buying or too low to begin selling.
  • #336
  • Apr 15, 2012 3:34pm Apr 15, 2012 3:34pm
Thanks for the info. What is the cost? Does it do lot size calculation for you for various pairs based on a percentage of your account? That's the thing that always takes me the longest when setting up a trade.

Scott

Quoting julie1585
I use MYFX for trade management and would not be without it.
Prices are never too high to begin buying or too low to begin selling.
  • #337
  • Apr 15, 2012 4:16pm Apr 15, 2012 4:16pm
In this kind of trades I'm keeping my stoploss at the other end of the signal bar.

However, I'm trading the bounces of the trendlines, going with the flow.
Not crucial reversal points of the market.

I have a post ready where I will explain how I do it, but I'm still a junior member, so I can't create threads, yet.

Quoting thehenryfam
Interesting idea. Are you still keeping your stoploss at the other end of the signal bar or is your SL even dictated by the reverse divergence?

How have you found your R:R doing it that way?

Scott
  • #338
  • Apr 15, 2012 8:16pm Apr 15, 2012 8:16pm
Possible setup in EU according to the 15 min chart. Obviously, in the larger timeframes, the setup hasn't formed yet. Any comments?
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  • #339
  • Apr 15, 2012 10:48pm Apr 15, 2012 10:48pm
Quoting thehenryfam
Thanks for the info. What is the cost? Does it do lot size calculation for you for various pairs based on a percentage of your account? That's the thing that always takes me the longest when setting up a trade.

Scott
Hi Scott,

I checked the website and its $249 py or $85 pq, there is a video intro and a trial for demo accounts available and a list of brokers that will pay for it for you on the website.

And yes it does do lot size if you use the place order method, (i use 1 click with preset sl and tp) but here is a pic of the order page, once you set sl you can change the risk you require and it calculates lot size.

Regards
Julie
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  • #340
  • Apr 15, 2012 11:03pm Apr 15, 2012 11:03pm
Thanks, Julie. Looks like a nice tool, but for that amount of money, I will probably continue to do it manually for the time being, at least until I get my account built up a good bit more.

Scott

Quoting julie1585
Hi Scott,

I checked the website and its $249 py or $85 pq, there is a video intro and a trial for demo accounts available and a list of brokers that will pay for it for you on the website.

And yes it does do lot size if you use the place order method, (i use 1 click with preset sl and tp) but here is a pic of the order page, once you set sl you can change the risk you require and it calculates lot size.

Regards
Julie
Prices are never too high to begin buying or too low to begin selling.
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