When is a Lower High a lower Lower High or a High High a higher Higher High

Beginner Questions
1

Hi

I was busy reviewing divergence on Babypip’s school of pipsology.

With reference to the image below (taken from School of Pipsology Momentum Tricks | Trading Divergences | High School - I’ve added number for easy reference.)

Why will numbers 2 and 3 not be considered Lower Highs and number 4 not be called a Higher High?
In this example 2 and 3 are not called anything, but 4 is called a Lower High.

I find this confusing. Could someone please explain?

How do you guys decide or determine which highs are HH and which are LH? (Same goes for LL and HL.)

Thanks,
hps

2

Good question…

If Point 4 did not exist, 2 & 3 would then be your “lower highs”.
The fact that Point 4 printed, invalidates the “lower high” requirement (for 3) in which price must be maintained beneath the most recent swing point.

Since 4 is still maintained beneath 1, it’s technically still a lower high.

Check out this post - it’s a live example of exactly what you posted / the theory you’re learning about.

Let me know if that makes sense.

3

Roughly:

  1. we are talkin’ about: divergence. Divergence between what?
    Divergence between price’s highs (or lows) AND indicator’s highs (or lows)
  2. previous price’s AND indicator’s high(s): 1
  3. latest price’s AND indicator’s high(s): 4

Other price’s high(s): 2 & 3 do not come together with indicator’s high(s) THEREFORE they are not worth for technical analysis.

as said, this is a rough explanation; requires re-readings + practising

hope this helps

4

in case i got carried away on wrong issue in previous post:

legend:
H=High
L=Low
HH=Higher High
HL=Higher Low
LH=Lower High
LL=Lower Low

5

Thanks guys for your reply’s. This is making much more sense now.

@FOREXUnlimited, following actual trades is most helpful. Thanks.
@etfak, you gave me a few things to think about.

Thanks,
hps

6

[QUOTE=“hps;619756”]Thanks guys for your reply’s. This is making much more sense now. @FOREXUnlimited, following actual trades is most helpful. Thanks. @etfak, you gave me a few things to think about. Thanks, hps[/QUOTE]

Glad to help.
Don’t be afraid to ask questions.

Jake

7

My next question should probably be part of another thread, but in order to check out divergence, I need to know the correlation between the EMA - mine set to 10 & 25 EMA on the close - and the oscillators I will be using.

Now, what should the settings be for the stochastic and MACD? I just left it on the defaults as per MetaTrader4.

Maybe I should rather ask, what/how do you determine the correlation between EMA’s, Stochastic and MACD?

There are a lot of settings for Stoch and MACD and I don’t know which is best (or rather advisable) to use.
(I understand what “Simple”, “Smoothed” and “Exponential” means, but I don’t know which to apply when and where.)

Thanks,
hps