Divergences

[Rambo35]

There are two types of divergences, a positive divergence and a negative divergence. The majority views a positive divergence as a buying opportunity and a negative divergence as a selling opportunity. A positive divergence occurs when the price of an asset keeps declining and making lower lows while the technical indicator makes a higher low; a negative divergence occurs when the price of an asset makes a higher high while the technical indicator makes a lower high.

There are some technicians who view a divergence as a continuation signal, which camp do you belong to?

I view a positive divergence as a buying signal and a negative divergence as a selling signal but only together with other aspects of technical analysis and not stand alone.

[krafty]

i see divergence as a good way of exiting your trade precisely.

[nisar]

There are two types of divergences, a positive divergence and a negative divergence. The majority views a positive divergence as a buying opportunity and a negative divergence as a selling opportunity. A positive divergence occurs when the price of an asset keeps declining and making lower lows while the technical indicator makes a higher low; a negative divergence occurs when the price of an asset makes a higher high while the technical indicator makes a lower high.

There are some technicians who view a divergence as a continuation signal, which camp do you belong to?

I view a positive divergence as a buying signal and a negative divergence as a selling signal but only together with other aspects of technical analysis and not stand alone.

that is a regular divergence which presents buying and selling opportunity. the other type of divergence is hidden divergence which also presents buying and selling opportunity.

[anon88459104]

I don’t use divergence alone, it’s already been proven to not work in the long term… in fact i think there are some stats on this in the BP school.

[Saul_Reivers]

I don’t use divergence alone, it’s already been proven to not work in the long term

I agree. But the odds can be heightened if it’s utilized as a complimentary addition to something else that has been proven to offer you a slight edge when initiating positions.

This guy submitted a very nice post offering one such example of using divergence.

Fibonacci Combinations?

oscillator divergence, but the trick is to use it across multiple time frames, and use a mix of regular and hidden divergence according to market behavior in each timeframe. If you’re looking for a reversal in a particular timeframe, use regular divergence, if your looking for trend continuation on shallower pullbacks, use hidden divergence.

If your using fibs, find a timeframe that’s trending, lets assume the 30 min chart shows a good trend with classic higher high higher low price action. Determine your fib levels on that chart, and then look for hidden divergence in the oscillators as price reaches those levels. That’s your signal that the trend may resume. On deeper pullbacks, you might even get regular divergence.

Then look on a faster timeframe, say 5 minute, and look for regular divergence in the oscillators, that’s the signal that trend might reverse. If your late entering, and the reversal is already in place, drop to the 1 minute chart, which should now be trending, and look for the hidden divergence re-entry into the new trend.

I don’t really use TA these days, but if I did, I’d be looking at trend structure (higher highs, lower lows etc) support and resistance (including fibs), price deviation from short term averages, oscillator divergence, with candle patterns as the final trigger.

If I was using fibs, I’d also be looking at using extensions too in order to get an idea where swings might terminate, when you get a confluence of a retrace level in your trend timeframe, and an extension from faster timeframes these tend to give high probability zones, and if these occur at levels tested by price previously, so much the better.

[krafty]

ya, i saw but if you combine with fundamental, it should work fine.

there is no perfect tech. so you have to adjust and balance between tech and fundamental.

if anybody think otherwise, please tell us. thanks!

I don’t use divergence alone, it’s already been proven to not work in the long term… in fact i think there are some stats on this in the BP school.

[TheLastBear]

Since I see nobody answered Rambo’s question here is mine: I view a positive divergence as a bullish sign and a negative divergence as a bearish sign.

As you pointed out, not as a standalone indicator but as part of an overall analysis.

[marypippins123]

I think there are four kinds actually: bullish hidden, bullish regular, bearish hidden, and bearish regular, right? If I’m not mistaken, the hidden divergences show trend continuations while regular ones hint at reversals. I’m more inclined to take the signals, whether positive or negative, from regular divergences tho. Of course you’re right, it is just a part of overall analysis.