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  • #6,821
  • Aug 20, 2012 1:42am Aug 20, 2012 1:42am
Au 4 hr head n shoulder
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  • #6,822
  • Aug 20, 2012 1:57am Aug 20, 2012 1:57am
Quoting MoneyMaker69
Hey Robot Trader,

I have been trading for a while and use regular divergence quite often as an additional tool to verify signals. I have also seen this term hidden divergence floating around for a few months quite a lot more than ever before. Could someone explain to me what hidden divergence is or looks like on a chart?

Thanks
Hi MoneyMaker69

The chart I posted earlier shows it, it is also reliable when found on the Stoch's. If the Stoch & MACD histogram show it at the same time then even better.

Once you have found it look for regular divergence on no more than 2 TF's lower and then use S&R or candle patterns to begin your attack.

On the chart I posted you will see Positive MACD histogram bars followed by Negative then Positive again, but the second group of Positive bars are higher than the first lot of Positive bars, but the price as failed to make new highs, which means the MACD is not following the PA (it is not in convergence with PA) so this is called hidden divergence. This means unlike regular or continuing divergence hidden divergence is trend following and therefore if you have a strong trend it maybe safer to trade.
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,823
  • Aug 20, 2012 2:28am Aug 20, 2012 2:28am
Hello all and good day.
  • #6,824
  • Aug 20, 2012 3:02am Aug 20, 2012 3:02am
Thanks RT, makes sense, I think my understanding of divergence was a little mixed as some of the things I look for for regular divergence, seem to fall under hidden divergence.

Anyway, it still seems to be an effective additional check for my system.

Seems very quiet in here today. My charts signals say long but sentiment on blogs is definitely short. Guess no one wants to take the leap and commit one way yet today : )
  • #6,825
  • Aug 20, 2012 3:16am Aug 20, 2012 3:16am
Quoting MoneyMaker69
Thanks RT, makes sense, I think my understanding of divergence was a little mixed as some of the things I look for for regular divergence, seem to fall under hidden divergence.

Anyway, it still seems to be an effective additional check for my system.

Seems very quiet in here today. My charts signals say long but sentiment on blogs is definitely short. Guess no one wants to take the leap and commit one way yet today : )
Good I am glad you understand divergence better.

The market might well be waiting to see what the RBA meeting minutes say, before any real moves begin.
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,826
  • Aug 20, 2012 4:05am Aug 20, 2012 4:05am
Perhaps the trepidation of commitment is due to the AUD Monetary Policy Meeting Minutes to be released tonight?


Happy Trades,
fxstir
  • #6,827
  • Aug 20, 2012 4:06am Aug 20, 2012 4:06am
Exactly Robot Trader,

I didn't refresh my screen and missed your post but we were thinking the same thing.

Regards,
fxstir
  • #6,828
  • Aug 20, 2012 4:30am Aug 20, 2012 4:30am
Quoting Robot Trader
I am not saying my 1H chart is showing Regular or continuing divergence, I am saying it is showing hidden divergence a completely different animal.
Hidden divergence sounds very cryptic. Never heard of this terminology. Could you share your definition of hidden divergence?
daddybearforex. com
  • #6,829
  • Aug 20, 2012 4:39am Aug 20, 2012 4:39am
Quoting DaddyBear
Hidden divergence sounds very cryptic. Never heard of this terminology. Could you share your definition of hidden divergence?
I did not refresh the page and asked a question you already answered. But, how reliable is it?
daddybearforex. com
  • #6,830
  • Aug 20, 2012 4:43am Aug 20, 2012 4:43am
We are now getting hidden divergence forming on the 1H stoch's along with the MACD and also the MACD is building continuing divergence on the 30M chart and we already have divergence which is holding on the 15M chart.

If it could make a further push up to 1.048/1.05 that would be even better place to attack, I will watch PA before attacking, but I believe we will be heading back down to test the recent low.
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,831
  • Aug 20, 2012 4:44am Aug 20, 2012 4:44am
Quoting DaddyBear
Hidden divergence sounds very cryptic. Never heard of this terminology. Could you share your definition of hidden divergence?

It's just the opposite of regular divergence:

Regular: price makes new high but indicator fails to do the same

Hidden: indicator makes new high but price fails to do the same

I find regular to be more reliable.
  • #6,832
  • Aug 20, 2012 4:53am Aug 20, 2012 4:53am
Quoting Robot Trader
Not sure how the market will open, but looking at the H1 we have a possible downtrend channel (3 spots on the bottom line), supported by possible H1 MACD hidden divergence marked with the purple lines.

The market could just open way above my line and blow my idea out of the water, but I will watch and see what happens.
Hi DB,

I posted this chart showing hidden divergence a while back which did the job, like all things in Forex nothing is guaranteed, but I look for high probability trades which hopefully give me an edge and a good R:R.

Cheers RT
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,833
  • Aug 20, 2012 4:57am Aug 20, 2012 4:57am
Quoting Sutts
It's just the opposite of regular divergence:

Regular: price makes new high but indicator fails to do the same

Hidden: indicator makes new high but price fails to do the same

I find regular to be more reliable.
Yes it is important rule not to trade Hidden without regular divergence on lower TF's
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,834
  • Aug 20, 2012 5:22am Aug 20, 2012 5:22am
Quoting Sutts
It's just the opposite of regular divergence:

Regular: price makes new high but indicator fails to do the same

Hidden: indicator makes new high but price fails to do the same

I find regular to be more reliable.
Thanks for your concise but clear explanation. I would call it Reversed Divergence for easier understanding.

I do have some reservations about both divergences due to the following reasons.

1. MACD is a lagging indicator.
2. Other indicators can provide divergence signals as well.
daddybearforex. com
  • #6,835
  • Aug 20, 2012 5:30am Aug 20, 2012 5:30am
Quoting doblece
Try this app:
http://itunes.apple.com/us/app/trade-interceptor-forex-mobile/id329476057?mt=8

I use it on Android and charting is really awesome. Should be the same on your device.
Thanks doblece. I set this up today. It has excellent charting and indicators.
and works well on iphone. Much appreciated for the post.
Regards,

Moova
  • #6,836
  • Aug 20, 2012 5:30am Aug 20, 2012 5:30am
Quoting DaddyBear
Thanks for your concise but clear explanation. I would call it Reversed Divergence for easier understanding.

I do have some reservations about both divergences due to the following reasons.

1. MACD is a lagging indicator.
2. Other indicators can provide divergence signals as well.
It is true that the MACD is a lagging indicator, but in the case of divergence it can be classed has being a lead indicator, once divergence is formed then there is an high probability price will respond to that divergence, but from what level is always the hard part.
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,837
  • Edited 5:51am Aug 20, 2012 5:34am | Edited 5:51am
Quoting Robot Trader
Hi DB,

I posted this chart showing hidden divergence a while back which did the job, like all things in Forex nothing is guaranteed, but I look for high probability trades which hopefully give me an edge and a good R:R.

Cheers RT
I remember you got a A from ADX exam. Got a good question for you. The daily ADX did not give a reversal signal on Aug. 9 but the bears including you strongly believe a top was formed.

After looking at daily ADX again and again, I'd say there was no top or reversal on Aug. 9. IMHO

Edit- Another platform did show some possibility. Due to no agreement between two platforms, I'd rather wait until further clear and agreeable confirmations given by both platforms.
daddybearforex. com
  • #6,838
  • Aug 20, 2012 6:05am Aug 20, 2012 6:05am
Quoting DaddyBear
I remember you got a A from ADX exam. Got a good question for you. The daily ADX did not give a reversal signal on Aug. 9 but the bears including you strongly believe a top was formed.

After looking at daily ADX again and again, I'd say there was no top or reversal on Aug. 9. IMHO
Please see my attached chart, this is advanced ADX chart reading and fresh in my mind from my recent exam and exam notes.

On the 05th August the ADX started to move down from the 30 level and by the 9th August was at the 25 level, but price had made new highs within this time period, we therefore had divergence on the ADX.

The problem with the ADX is traders use it as a signal to exit trades once a trend in coming to an end normally once the ADX starts to move down, but following a strong trend the ADX is better used once the market starts ranging again to help find the next trend breakout. However some advanced teachers believe the ADX itself can be used to spot trend reversals, by watching for divergence within the ADX.

I hope you find my answer interesting and somewhat logical, but the best way to see how correct this way of trading the ADX would be to go back over old charts and find where the ADX shows divergence and look to see what the market did next.
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Some people say I'm lucky, but the more I practice the luckier I get
  • #6,839
  • Aug 20, 2012 6:09am Aug 20, 2012 6:09am
Quoting DaddyBear
I remember you got a A from ADX exam. Got a good question for you. The daily ADX did not give a reversal signal on Aug. 9 but the bears including you strongly believe a top was formed.

After looking at daily ADX again and again, I'd say there was no top or reversal on Aug. 9. IMHO

Edit- Another platform did show some possibility. Due to no agreement between two platforms, I'd rather wait until further clear and agreeable confirmations given by both platforms.
BTW Just a quick note I got an A+ not an A
Some people say I'm lucky, but the more I practice the luckier I get
  • #6,840
  • Aug 20, 2012 6:13am Aug 20, 2012 6:13am
Quoting DaddyBear
Thanks for your concise but clear explanation. I would call it Reversed Divergence for easier understanding.

I do have some reservations about both divergences due to the following reasons.

1. MACD is a lagging indicator.
2. Other indicators can provide divergence signals as well.

I share your reservations about indicators. However I believe when used to spot divergence, indicators can provide leading signals.

Most indicators used for divergence show momentum. When price bars are closing away from their highs (getting wicky) this shows that momentum is reducing and this is reflected in the momentum indicators.

So....when price is putting in a new high but momentum is waning it can show that price is struggling to put in that new high - it may be being artificially supported such as during a stop run and COULD be about to turn.

Relying solely on divergence can get you into trouble however, especially during a strong sustained move. I've seen divergence setups fail again and again during such a move.
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