I must be one of the few people here that trade these patterns...
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DislikedSome traders regard oscillator divergences as the holy grail of technical analysis But ,The two main problems with divergence is that it often signals a (possible) reversal but no actual reversal occurs - a false positive. The other problem is that divergence doesn't forecast all reversals. In other words, it predicts too many reversals which don't occur, and not enough real price reversals. I wish I could find a method to filter divergence signalsIgnored
DislikedSome traders regard oscillator divergences as the holy grail of technical analysis But ,The two main problems with divergence is that it often signals a (possible) reversal but no actual reversal occurs - a false positive. The other problem is that divergence doesn't forecast all reversals. In other words, it predicts too many reversals which don't occur, and not enough real price reversals. I wish I could find a method to filter divergence signalsIgnored
Disliked{quote} {image} As you can see from this picture . This is an MACD divergence. All the divergence that are false (marked by red 'X'), are those rejected by the market after its formation. The good ones (marked by blue check sign) are those supported by the market after its formation. You can see in the good ones they were breakouts in the divergence direction thus confirming the divergence but this was not the case with the false divergence. So don't depend on just the divergence, wait to see the reaction after the divergence before entering the...Ignored