Tactical Use of Divergence

Section for discussions related to indicators, use of indicators, and building of trading stategies using indicators.

Moderator: admin

Tactical Use of Divergence

Postby mennzz » Mon Apr 28, 2014 2:24 am

Divergence. Everywhere all the time and yet hidden on many a different level of spectrum, it's divergent pathways are indeed moderately complex. But even simply using basic divergence analysis, the data it shows and the decisiveness it provides can come in handy when choosing when to place a trade or exit one -- the mean could be a difference between a winning trade or experiencing a loss. Here are the many ways that divergence can be decisive and tactically useful. Let's make this quick... 8-)

Types of Divergences:
1. Classic Divergence.
2. Mountain (Peak) Divergence.
3. Axle Divergence.
_______________________

1. Classic Divergence
Classic divergence or rather, regular divergence is the daddy of all divergences. Millions of people use it, as well as the many who don't. It's functions are quite simple and analyzing it is much the same.
Classic Divergence.jpg
Classic Divergence + Reverse Classic Divergence

_______________________

2. Mountain Divergence (or Peak Divergence)
Mountain divergence is actually quite simple and is just a variant of the super-daddy classic divergence. All that's changed with the regular divergence is just the attachment of an extra second point. All that's need then is to identify a mountain top or peak.
Mountain (Peak) Divergence.jpg
Mountain (Peak) Divergence

_______________________

3. Axle Divergence
Axle Divergence is a little bit more complex than the others and may not form at all sometimes, but it's the same much as powerful and every bit as useful. It works best when in the trend already and could serve as triggers for the next push in the direction of the trend once the divergence is fully developed.
Axle Divergence.jpg
Axle Divergence

_______________________

These types of divergences can be found on many oscillators such as MACD, CCI, RSI, Stochastics and many more. Learning them well and optimizing them into your trading system can help you a whole lot. Be careful though. Sometimes, divergence just doesn't work and creates fake-outs that can trick you into trades you shouldn't be in. It's best to couple these methods with other indicators and methods to eliminate the possibility that such may ever happen. Please enjoy them well. Lots of luck!

[Disclaimer: Not responsible for any trades based on these methods.]
mennzz
 
Posts: 78
Joined: Sun Jul 04, 2010 4:28 pm

Return to Discussions

Who is online

Users browsing this forum: No registered users and 4 guests