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

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

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.

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

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

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=“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

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