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EASY H1 trading using divergence and candle sticks

  • #1,301
  • Sep 12, 2012 9:14am Sep 12, 2012 9:14am
hi pureprice, thankyou for sharing this great system, I use it on my chart now and very helpfull..
  • #1,302
  • Sep 12, 2012 10:01am Sep 12, 2012 10:01am
PurePrice has asked me to set this up. I am going to create a Skype Group Chat for this thread some time later today. I will post more details when I get some time.

Quoting devgtx460
I seriously want to setup a trading room where we can trade divergence only, of-course we can include S/R, channel and pin bars etc to confirm a divergence entry.

This way we can collectively watch the divergence formation as they happen.
Anyone interested ?
  • #1,303
  • Sep 12, 2012 3:13pm Sep 12, 2012 3:13pm
If anyone is interested in a chat room for this thread, please send me a pm. If I get a few, I will set it up for us.
  • #1,304
  • Sep 13, 2012 7:20am Sep 13, 2012 7:20am
Generally it is said that divergences fail more ofthen than not. I would gladly see some hints, tips, information on how to find or filter high probability divergences. There are many kind of the well known divergences between indicator and price. The basics are regular and hidden, these may differ on several points.

There are different hints, for example not to use normalized indicators (like RSI, Stoch), indicator must cross 0 line, must cross signal line, over-under divergence, combination with Bollinger Bands, the "Missing Right Shoulder" type, multiple divergences. Class A,B,C makes difference on the slope/angle of the divergence lines. Filtering choppy markets or previous trends/ranges, filtering on price / indicator value ranges between 1st and 2nd point. How much difference may be between the price and indi. peaks, what is the best minimum, maximum distance of the 2 peaks. Combination with another kinds of divergences may also increase the probability, for example momentum div. with volume div (eg. MACD+OBV or PVT). The divergence becomes invalid on some conditions, for example when price breaks the 2nd peak. It seems it is better to consider failed when the momentum indicator exceeds the second point of divergence.
(I thought of filtering insignificant indicator peaks with added Bollinger Bands on the indi.)

There are at least 30-40 indicators or maybe many more that can be used finding divergence, some better than another. Generally the MACD and OsMA are considered the best, but there are many more which seem to be good enough.

The best entry signal or a combination of signals is also a good subject to discuss.
  • #1,305
  • Sep 13, 2012 7:28am Sep 13, 2012 7:28am
Quoting szgy74
Generally it is said that divergences fail more ofthen than not. I would gladly see some hints, tips, information on how to find or filter high probability divergences. There are many kind of the well known divergences between indicator and price. The basics are regular and hidden, these may differ on several points.

There are different hints, for example not to use normalized indicators (like RSI, Stoch), indicator must cross 0 line, must cross signal line, over-under divergence, combination with Bollinger Bands, the "Missing Right Shoulder"...
Thanks for your input. You can certainly add as many conditions as your heart desires, but the more conditions you add, the more complicated the setups become, and the thusly the less frequent. This is meant to be EASY (as the title of the thread states), and not over complicated with too many indicators , filters and conditions. We are trying to keep it simple and not fall into the trap of "paralysis by over analysis". We have one indicator for divergence (you can use an alternate indicator instead of RSI if you would like) and candle stick formation at significant price levels (R/S, pivots, round numbers, TL, etc) as our filter, and breaking the low/high of the signal candle (by a few pips) as our confirmation of price action.
  • #1,306
  • Sep 13, 2012 8:08am Sep 13, 2012 8:08am
Quoting cmac0351
PurePrice has asked me to set this up. I am going to create a Skype Group Chat for this thread some time later today. I will post more details when I get some time.

Thank you for doing this cmac, I really appreciate your effort and look forward to joing this skype chat room. Count me in
  • #1,307
  • Sep 13, 2012 8:18am Sep 13, 2012 8:18am
I'm watching CADCHF, H1
It's interesting setup - PA right on the green, but should be careful for the yellow zone..
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  • #1,308
  • Sep 13, 2012 9:14am Sep 13, 2012 9:14am
Quoting PurePrice
Thanks for your input. You can certainly add as many conditions as your heart desires, but the more conditions you add, the more complicated the setups become, and the thusly the less frequent. This is meant to be EASY (as the title of the thread states), and not over complicated with too many indicators , filters and conditions. We are trying to keep it simple and not fall into the trap of "paralysis by over analysis". We have one indicator for divergence (you can use an alternate indicator instead of RSI if you would like) and candle stick formation...
Very, very well said PurePrice. We need one indicator to show div combined with a candle formation (I use pinbars) confirmation and act! Pure price action trading. No need to overthink. Stack the odds in your favor and pull the trigger. If you win, great. If you lose, forget about it, and move on.
  • #1,309
  • Sep 13, 2012 2:18pm Sep 13, 2012 2:18pm
Quoting PurePrice
Thanks for your input. You can certainly add as many conditions as your heart desires, but the more conditions you add, the more complicated the setups become, and the thusly the less frequent. This is meant to be EASY (as the title of the thread states), and not over complicated with too many indicators , filters and conditions. We are trying to keep it simple and not fall into the trap of "paralysis by over analysis". We have one indicator for divergence (you can use an alternate indicator instead of RSI if you would like) and candle stick formation...
OK, I see. I did not mean to change your strategy, only to discuss some things that may improve divergence setups. Most of the mentioned conditions are built in my divergence setup indicator and in fact this makes analysis much less paralyzing :-) by filtering out the setups, markets that are not worth looking at. The indicators are not even displayed only the setups on the price chart. These conditions are usually not too complicated, some are visually quite easy to see (probably not at first sight). for example oversold points what signal failed divergence 2-3 times before it actually happens. The result of the "missing right shoulder" (by Alexander Elder) is usually an immediate strong rally.
  • #1,310
  • Sep 14, 2012 7:31am Sep 14, 2012 7:31am
looks like short opportunity at eur/usd.
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Trend Is Friend
  • #1,311
  • Oct 12, 2012 10:40am Oct 12, 2012 10:40am
Just became a member today. Looking for a Hidden Divergence forum. I am not a full time trader and usually looking for a trade at the end of a day due to my job. Today happens to be my Flex Friday off. So, I will be looking for a divergence set-up on 1hr/4hr/Daily chart.

Look like the system is very straight forward without a lot of analysis. But I have added one more confirmation to the setup. The Trend-line(TL) break must be with the cross-over of the MACD before taking a trade.

I am using the MACD default settings. MACD provides the added momentum to the setup.

In addition, instead of taking all the trades, I look for a trend. What do I mean by a trend?

If the trend is up, I try to take only for the bullish HD.
If the trend is down, I try to take only for the bearish HD.

I have been back-testing to see how it works out. So far, the result seems to be satisfactory.
  • #1,312
  • Oct 14, 2012 9:32am Oct 14, 2012 9:32am
Thank you for your tip! I also get positive backtest result. I'd like to use CCI 0 line as an exit signal.

Thanks

Quoting androidforex
Just became a member today. Looking for a Hidden Divergence forum. I am not a full time trader and usually looking for a trade at the end of a day due to my job. Today happens to be my Flex Friday off. So, I will be looking for a divergence set-up on 1hr/4hr/Daily chart.

Look like the system is very straight forward without a lot of analysis. But I have added one more confirmation to the setup. The Trend-line(TL) break must be with the cross-over of the MACD before taking a trade.

I am using the MACD default settings. MACD provides the added...
Simplicity is the ultimate sophistication - Leonardo da Vinci
  • #1,313
  • Oct 14, 2012 5:08pm Oct 14, 2012 5:08pm
Hello PurePrice,

The following EU H1 chart is showing two divergences, I am new to the concept of Divergence trading and ofcourse a little confused.

If I understand correctly (chance is I dont) the first one is regular div and second one hidden div .. which one is valid in this case and why? If one of them is not correct, what makes them wrong? Or is it me messed up drawing them?

I really enjoyed reading your thread and hopefully will be around.

Thank You.
Attached Image (click to enlarge)
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" The fool who never traded Demo "
  • #1,314
  • Edited 9:04pm Oct 14, 2012 8:32pm | Edited 9:04pm
Possible AU long?

It finally formed a bullish engulfing bar, rejected from a round number and 61.8 fib level of previous up swing. Any comment?
Attached Image (click to enlarge)
Click to Enlarge Name: au1.gif Size: 25 KB
" The fool who never traded Demo "
  • #1,315
  • Oct 15, 2012 12:45am Oct 15, 2012 12:45am
Quoting AmareX
Hello PurePrice,

The following EU H1 chart is showing two divergences, I am new to the concept of Divergence trading and ofcourse a little confused.

If I understand correctly (chance is I dont) the first one is regular div and second one hidden div .. which one is valid in this case and why? If one of them is not correct, what makes them wrong? Or is it me messed up drawing them?

I really enjoyed reading your thread and hopefully will be around.

Thank You.
They are both valid, but you can't trade divergence on its own you need confirmation, there was no confirmation of the hidden bullish divergence with candle patterns.
  • #1,316
  • Oct 15, 2012 1:01am Oct 15, 2012 1:01am
Quoting ohammond
They are both valid, but you can't trade divergence on its own you need confirmation, there was no confirmation of the hidden bullish divergence with candle patterns.
Good point,Thanks ohammond. I took the EU short right after the first Div with the 2 bar engulfing confirmation. closed it for 60 pip Now I am long AU.

The concept of hidden div is still blurry to me, I hope someone can provide some more info/examples on it?

Cheers.
" The fool who never traded Demo "
  • #1,317
  • Oct 15, 2012 1:09am Oct 15, 2012 1:09am
Quoting AmareX
Good point,Thanks ohammond. I took the EU short right after the first Div with the 2 bar engulfing confirmation. closed it for 60 pip Now I am long AU.

The concept of hidden div is still blurry to me, I hope someone can provide some more info/examples on it?

Cheers.
If you work your way through this along with the links its a very good first grounding: http://www.babypips.com/school/high-...g-divergences/
  • #1,318
  • Oct 15, 2012 9:56pm Oct 15, 2012 9:56pm
Quoting ohammond
If you work your way through this along with the links its a very good first grounding: http://www.babypips.com/school/high-...g-divergences/

Thanks for the Divergence trading website.
  • #1,319
  • Oct 17, 2012 6:35am Oct 17, 2012 6:35am
Hi Folks,

Is anyone seeing any kind of divergence (Regular Or Hidden) in any pair on a longer time frame such as 1hr/4hr/Daily?

Please post more info, so we can all take advantage of the trading opportunity.

Thanks
  • #1,320
  • Oct 22, 2012 10:58pm Oct 22, 2012 10:58pm
Does anyone know about ADX divergence? Is this effective in Forex trading?
Simplicity is the ultimate sophistication - Leonardo da Vinci
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