Learning How to Spot the Correct Divergence... Beginner Inside | Forex Factory

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Learning How to Spot the Correct Divergence... Beginner Inside

  • #1
  • First Post: Sep 13, 2013 11:01am Sep 13, 2013 11:01am
Well it's all in the title. I'm new to trading. Read about several ways during the last month and I feel that the divergence is the way to go. Not because it worked out for me in my first trade but I've looked into the charts history and it does work. So The Idea in this thread is simple. I'll post whatever I spot as a divergence and you the expert traders here correct me if it's wrong, better with the reason because the goal of this thread is to learn it. Thx in advance
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  • #2
  • Sep 13, 2013 11:03am Sep 13, 2013 11:03am
Is this a bullsih divergence ? is it late to enter ?
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  • #3
  • Sep 13, 2013 11:19am Sep 13, 2013 11:19am
Quoting Muhammad Ezz
Is this a bullsih divergence ? is it late to enter ? {image}
There is only one way you are going to be able to answer this question (and your other questions)...asking for opinions from other traders isn't going to work...you will get as many opinions as there are traders...each has a slightly different perspective which will form varying points of view.

If you truly want to answer your own question you need to do a research project. Call it a "statistical analysis". Take the formation you have pointed out in your screen shot. Go back to the historical data and count how many times that same formation occurred over the past few years...the more data the more accurate your conclusions. Keep track of how many times that formation created the effect you are looking for and how many times it didn't.

Now do a probability study of your data. If you have a probability of greater than 50% with this formation...you have answered your own question. Now you know that the probability of this formation has a x% chance of producing the effect you are looking for and will then have to create a plan to take advantage of that probability.

Asking us if this is or is not "bullish divergence" is irrelevant and counter productive. As you saw with your last three questions...there will be varying points of view, some right...some not...this means nothing. What matters is YOUR point of view and what you do with it. In order to form your own point of view you should base it on research and probability. This is what many of us term an "edge". Then when you see your "edge" you must come up with a way to exploit that edge to your advantage.
  • #4
  • Sep 13, 2013 11:21am Sep 13, 2013 11:21am
Correct ? ... Late to enter ?
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  • #5
  • Sep 13, 2013 11:23am Sep 13, 2013 11:23am
Quoting gspajon
{quote} There is only one way you are going to be able to answer this question (and your other questions)...asking for opinions from other traders isn't going to work...you will get as many opinions as there are traders...each has a slightly different perspective which will form varying points of view. If you truly want to answer your own question you need to do a research project. Call it a "statistical analysis". Take the formation you have pointed out in your screen shot. Go back to the historical data and count how many times that same formation...

so is it ?
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  • #6
  • Sep 13, 2013 11:31am Sep 13, 2013 11:31am
In the example above, it might persuade me that the level of 1.3253 could act as support again, but definitely not enter much higher. Learning about divergence can be a bit of a blind alley. Tempting though they are, divergence set ups are there because the indicator has failed.

Sometimes, on a higher time scale than the one we choose to trade from, and to help confirm a change of trend, a divergence signal is useful off a significant level. Sometimes if there is divergence on a pull back and it confirms a return to the trend it can be useful but this is quite rare.
Gone to a better place
  • #7
  • Sep 13, 2013 11:39am Sep 13, 2013 11:39am
Quoting Muhammad Ezz
{quote} so is it ?
OK...I'm done...

In MY country we have a saying. "You can lead a horse to water but you can't make him drink."

Keep on with your studies...you will see eventually...in the mean time I'll be taking the other side of your trades.
  • #8
  • Sep 13, 2013 11:41am Sep 13, 2013 11:41am
Quoting smikester
In the example above, it might persuade me that the level of 1.3253 could act as support again, but definitely not enter much higher. Learning about divergence can be a bit of a blind alley. Tempting though they are, divergence set ups are there because the indicator has failed. Sometimes, on a higher time scale than the one we choose to trade from, and to help confirm a change of trend, a divergence signal is useful off a significant level. Sometimes if there is divergence on a pull back and it confirms a return to the trend it can be useful but...
Thanks for the info
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  • #9
  • Sep 13, 2013 11:42am Sep 13, 2013 11:42am
Quoting gspajon
{quote} OK...I'm done... In MY country we have a saying. "You can lead a horse to water but you can't make him drink." Keep on with your studies...you will see eventually...in the mean time I'll be taking the other side of your trades.
That would be correct if you can lead the horse to the water. I doubt it man. I wasn't really asking
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  • #10
  • Sep 13, 2013 11:44am Sep 13, 2013 11:44am
Quoting gspajon
{quote} OK...I'm done... In MY country we have a saying. "You can lead a horse to water but you can't make him drink." Keep on with your studies...you will see eventually...in the mean time I'll be taking the other side of your trades.
Hey gspajon! Good to see your posts. I entirely agree with your post and your reaction. I think jen101 answered the question in this guy's other thread. No harm in getting opinions...Interesting though and I think we have an enthusiastic trader in Muhammad Ezz.

Good luck with your trading Muhammad.
Gone to a better place
  • #11
  • Sep 13, 2013 11:49am Sep 13, 2013 11:49am
Quoting smikester
{quote} an enthusiastic trader in Muhammad Ezz
thanks man
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  • #12
  • Sep 13, 2013 11:51am Sep 13, 2013 11:51am
You are welcome. There are a bundle of dedicated divergence indicators in these threads. If you can't find them I can post them for you.
Gone to a better place
  • #13
  • Sep 13, 2013 11:52am Sep 13, 2013 11:52am
Quoting smikester
You are welcome. There are a bundle of dedicated divergence indicators in these threads. If you can't find them I can post them for you.

which threads are you talking about ? ... and yeah would like to if this is not gonna disturb you
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  • #14
  • Sep 13, 2013 11:59am Sep 13, 2013 11:59am
what about this one ?
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  • #15
  • Sep 13, 2013 12:00pm Sep 13, 2013 12:00pm
Hi, Muhammad. I would certainly not classify what you are looking at as divergence because the valleys are too far apart. To really read divergence, the swing points need to be adjacent to each other. Please see my attached chart. Also, you MUST wait for confirmation in the form of a trendline or SR break. This is because divergence is simply alerting you that momentum is slowing down....however, it is NOT telling you that price will reverse right away. It MAY reverse right away but it may also continue for days and weeks in the initial direction. This is why you HAVE to wait for price confirmation. Please take it from someone who has studied divergence on the charts for over ten years. Also, I would recommend using a 50 period CCI instead of MACD. That is simply my opinion, but after trying every indicator under the sun, I find the 50 period CCI to be a robust indicator of divergence. Honestly, I don't find any usefulness in any other indicator for any reason. They are all useless.
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There's always money in the banana stand.
  • #16
  • Sep 13, 2013 12:01pm Sep 13, 2013 12:01pm
Also, the GBPJPY daily chart you showed is not showing divergence in the MACD at all. Your peaks are too far apart to be relevant. They MUST be closer together.
There's always money in the banana stand.
  • #17
  • Sep 13, 2013 12:18pm Sep 13, 2013 12:18pm
Quoting LizardGizzard
Hi, Muhammad. I would certainly not classify what you are looking at as divergence because the valleys are too far apart. To really read divergence, the swing points need to be adjacent to each other. Please see my attached chart. Also, you MUST wait for confirmation in the form of a trendline or SR break. This is because divergence is simply alerting you that momentum is slowing down....however, it is NOT telling you that price will reverse right away. It MAY reverse right away but it may also continue for days and weeks in the initial direction....

Did you determine this level because it was used as a resistance to hold the price before ?
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  • #18
  • Sep 13, 2013 12:28pm Sep 13, 2013 12:28pm
That AND the reversal candle pattern which indicates a prominent swing point. However, a NEW swing point may be established soon.
There's always money in the banana stand.
  • #19
  • Sep 13, 2013 12:29pm Sep 13, 2013 12:29pm
Quoting LizardGizzard
That AND the reversal candle pattern which indicates a prominent swing point. However, a NEW swing point may be established soon.
All right
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  • #20
  • Sep 13, 2013 12:36pm Sep 13, 2013 12:36pm
Hey buddy check this out ... same pair on different TF
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