Tools for Divergence Trading

Hello. I would like to ask you all about your divergence trading systems. What indicators and what parameters are the best for you to trading divergence ?
Please share your experience with that.
Last time I'm using divergence in trading and the reseults are amazing. It's also impressive because of low risk and tight SL.

Here is chart that shows my today trade
http://charts.mql5.com/3/222/gold-m1...mcis-group.png

Regards, pretorian1

Depends from trader to trader, but ... Stoch, Rsi, Macd or Cci, one of them will do the job.

Hi Pretorian1:
Rsi 3 in h1 charts is good for me.
Regards.

Could you please explain that system, and tell where are divergences there ?

Hi pretorian:

Here you are some divergences.
The system i follow is very simple and can resume in a couple of steps.

Step 1: Determine the trend. I use mainly weekly pivot points. When Price is below trend is down. When Price is above trend is up. When Price is below i only take sell positions. When Price is above i only take buy positions.

Step 2: Wait for a divergence in a h1 chart. When it happens wait for Price breaks. Sl is above/below last high/low/round number/weekly s/r/daily open.
Step 3: Close half position to 1:2 rr and move rest to BE.
Step 4: Close rest to next monthly s/r.

Regards.

Jaquemate,
Thanks for explanation your system. It looks interesting and probably it is worth to test it.

Regards, pretorian1

Here's my divergence from Friday. SL: 20 pips above divergence high. Position closed before Friday market close so +60 pips.

I would caution you about divergence as an entry signal. You will find during a very strong trend that there is divergence everywhere you look but the trend does not reverse. Often times the exhaustion indicated by divergence is simply profit taking within a trend, and can be disastrous if trying to fade it or trade a contrarian style entry.

I use divergence a great deal but as a warning sign to tighten stops...not as an entry strategy. The exhaustion indicated in divergence is a good "heads up" signal to tell you to start conserving profit once you are already in a trend. So you tighten your stops and if the market is in a strong trend you continue to conserve more and more profit. If the market does retrace, then you have been stopped out with the majority of pips possible.

I also use it to find the "edges" of a range. It is particularly useful in determining the high or low of a range, and then use the contraraian entry, but again as a "stop" entry...not as a "blind" entry. If the market takes your stop...THEN you are in...and then you can use the divergence signal on the opposing side to tighten stops again and trade the other side. Sooner or later the range will break and you will be in at the most opportune area, and can now watch as your range trade turns into a trend trade.

However, using divergence as a "blind entry" signal, can often be very frustrating...speaking as one who finally saw the light...any technical analysis signal needs to have price actually do what the analysis projects BEFORE putting your money on the line...in this way you have a clearly defined stop and can then manage your position according to clear parameters...not some vague...I'll put my stop 20 (or pick your favorite number) pips from my entry.

Thank for caution. However I'm using divergence in trading since few months - with succes. You forgot about something - that divergences are "counter trend" but also "trend following". And be sure that I do not trade every divergence I see. Divergence are brilliant because of "risk to reward" ratio. SL is tight and profits from 30M and H1 divergence are often 7-20 times bigger than losses -> that gives you 1:7-1:20 risk/reward ratio. And I have never seen that "a lot of false divergences" because they are not often as you think. Or maybe we are using some different divergences. Because there are many of them and many styles trading them. I'm using STS and MACD divergences.