Divergence
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Thread: Divergence

  1. #1
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    Default Divergence

    Theoretically speaking, what if a hidden divergence and a regular divergence appeared at the same time. Personally I wouldn't enter, but I would like to here what you guys would do.. Thanks!!!!!

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    Quote Originally Posted by Katlego King View Post
    Theoretically speaking, what if a hidden divergence and a regular divergence appeared at the same time. Personally I wouldn't enter, but I would like to here what you guys would do.. Thanks!!!!!
    You know what, I'd look for more confluence to see which side is most favored by my other indicators and chart patterns maybe then according to that I'd enter

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    Quote Originally Posted by Katlego King View Post
    You know what, I'd look for more confluence to see which side is most favored by my other indicators and chart patterns maybe then according to that I'd enter
    In what context are you considering divergence? I suppose there are two areas that you could consider.

    1. The divergence produced by an indicator which is derived from a price chart over a fixed TF
    2. The divergence obtained by overlaying two correlated assets, securities, commodities or FX pairs, such as GBP/USD and EUR/USD and looking for price divergence without any indicators.

  4. #4
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    Divergence from a momentum oscillator like the Stochastic indicator

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    Quote Originally Posted by Katlego King View Post
    Divergence from a momentum oscillator like the Stochastic indicator
    OK, well in this case can you provide an image or screen shot of where you have seen both 'hidden' and 'regular' divergence at the same time.

    I'm not an advocate of using this type of analysis for trade entry, although I did do quite a lot of work on RSI divergence which can be applied to Stochastic - divergence is divergence at the end of the day.

    I'm struggling to imagine how you would see both at the same time, perhaps because I always used regular divergence and convergence 'divergence' in my early learning days.

  6. #6
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    Quote Originally Posted by Jezzode View Post
    OK, well in this case can you provide an image or screen shot of where you have seen both 'hidden' and 'regular' divergence at the same time.

    I'm not an advocate of using this type of analysis for trade entry, although I did do quite a lot of work on RSI divergence which can be applied to Stochastic - divergence is divergence at the end of the day.

    I'm struggling to imagine how you would see both at the same time, perhaps because I always used regular divergence and convergence 'divergence' in my early learning days.
    Well I haven't seen it yet but theoretical 's help me understand concepts better.. I imagine, lets say an uptrend has a hidden divergence, that would be below price and also below most of the momentum of the oscillator but at the same time there is regular divergence above hence in this scenario price would either reverse or continue. But I came to the conclusion that if this were to ever happen and I still relied on divergence then I would look for more confluence, support/resistance zones, candlestick and chart patterns and maybe even where prices momentum is on the Stochastic..

  7. #7
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    If price is in an uptrend then I'd always consider sticking with buy signals, until otherwise.

    As for you example, I would also consider two other metrics.

    1. The strength of divergence between both signals. You could measure this by simply looking to see which divergence signal has produced the most extreme signal.

    2. The length of time that the divergence signal has occurred for, and perhaps consider a way to measure how clean the divergence signal actually is.

    Either way, and as you have correctly suggested already, combining other PA elements is key. Using divergence for the reason to enter a trade has laid ruin to many accounts, rather I would look at divergence as a measure of confirmation that an existing trade is looking probable.

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    This is one of the major problems with off-chart indicators like RSI, MACD and stochastics. Within 10 minutes of setting your screen up there'll be incidences where one indicator contradicts what price is saying or contradicts another indicator.

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    Thanks guys, such insightful contributions!

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